Review of the Climate Challenge Fund

10. Future options

10.1 During interviews all respondents were presented with a range of specific (but not mutually exclusive) options for reshaping a future CCF (or any successor scheme). The Scottish Government wished to explore these to inform consideration of how any future scheme could best contribute towards tackling climate change.

Specific options for reshaping the CCF

Focus on innovation

10.2 The current CCF has had a focus on encouraging innovation. As described previously, respondents (both at case study level and wider stakeholder level) had mixed views on the need for the CCF to continually deliver innovation within projects. There was support for a future fund to encourage new ways to tackle climate change, but equally there was also significant support for continuing to deliver activities that have been proven to work well (if a continuing demand for such activities can be evidenced). A summary of the pros and cons of maintaining a focus on innovation were identified in the research and are summarised in Table 10.1.

Table 10.1: Pros and cons of including a focus on innovation in a future scheme

Pros	Cons
Produces a project tailored to meet the needs of the community	There is room for innovation but not at the expense of projects which are working and could continue to make a positive impact in their area
Climate change is a new challenge; our way of functioning needs to be challenged and requires innovative approaches	Carbon reduction targets stifle innovation, as projects have to focus on achieving measurable carbon savings rather than exploring innovative approaches that may be more difficult to measure
Changing technology, perceptions and attitudes requires innovation	Innovation is a barrier for smaller groups with limited experience and an increase in focus on innovation could restrict the types of applicant applying
	Can detract from the process of behaviour change
	Groups could become focused on tweaking or reframing projects to obtain funding to continue their work, rather than truly innovating

10.3 It is important to note that it was clear that there were varying interpretations of 'innovation', from adopting a successful group's project idea in a new community, to delivering something radically different, new and untested. To deliver the latter it may be that wider support and links to experts (such as academia and other organisations) may be required. However it was acknowledged by one stakeholder that currently "there are probably half a dozen standard things that most CCF groups do" [SH05], and to delivery truly innovative projects is extremely challenging, and potentially intimidating, for groups who may be unsure of the extent to which they will be effective in their project or able to measure changes.

10.4 On balance, it was typically felt that there should be space for innovation, but not to the exclusion of delivering projects that have been proven to be effective and for which a demand is evident. Benefits identified for continuing to fund projects included: operational efficiencies (e.g. no need to re-orientate delivery, retrain staff or develop new objectives); the likelihood of greater impact and CO2 reduction as groups will have learnt from experience; and the ability for groups to apply for shorter (e.g. 1 year) funding to test and develop ideas before committing to a larger project (which may be intimidating for smaller groups).

10.5 Overall a balanced approach was considered appropriate and that continuation funding should be possible, but strictly assessed on a project by project basis. This should take into account factors such as: detailed evidence of levels of ongoing community need (acknowledging that some project types may be likely to achieve diminishing returns if continuing to deliver the same output); robust evidence of impacts achieved; potential for revenue-generation and self-sustainability (if possible); and the length of previous funding (i.e. for shorter projects only). Discussions in relation to this type of assessment highlighted that a future fund may require two tiers of funding, with the criteria for continuation funding being more demanding (e.g. providing more detail on demand/community need) than that for 'new project' funding.

Focus on disadvantaged groups

10.6 As described elsewhere in this report, there was extensive support for a focus on disadvantaged groups to continue in any future fund. This was both as a result of the perceptions of success of this element of CCF3, and also of a need to ensure that any future fund is delivering across all elements of Scottish society. The focus was also deemed important as it encourages groups to target potential recipients from disadvantaged areas and to broaden their reach.

10.7 However, many respondents acknowledged the need to offer more proactive and in-depth support to develop projects from disadvantaged areas, acknowledging that ideas and groups in these may need to be 'harvested' and fostered to be successful and that capacity and resource may be limited.

10.8 In addition to this, given the focus on carbon saving of the CCF, it was acknowledged by many respondents that those in disadvantaged areas are likely to be those with the lowest carbon footprint. Subsequently, if communities are to be best supported to reduce carbon emissions, focusing on disadvantaged areas may not yield the greatest impact. That said, many groups have used CCF projects to alleviate fuel poverty, and the benefits of this to disadvantaged groups should be considered.

Co-funding

10.9 Respondents were asked to explore the pros and cons of including a requirement to obtain co-funding in any successor fund in the future (i.e. groups would not be 100% funded by CCF and would have to seek supplementary funding from elsewhere. Co-funding is a common requirement in other public and voluntary sector funding streams). This approach was typically not supported by groups and stakeholders, as one of the key strengths of the current fund was perceived as the option to fully fund projects. As a result of this, groups often avoided having to spend considerable resource securing multiple funds, matching differing funding scheme requirements and reporting and evaluating in different ways to different funders.

10.10 When considering the case study projects that were the focus of this review, almost exclusively they did not apply for co-funding for their specific projects, although there was significant evidence of other funding sources identified in the CCF Projects Survey (see table 5.3) and in the case study discussions. The exceptions (i.e. those that had co-funding) were for additional grants for building refurbishment or other equipment such as gardening tools. Although co-funding was encouraged in CCF3, it was acknowledged by groups that took part in this review as a difficult process to coordinate (especially for smaller organisations). Particular challenges identified by respondents included: issues with cash flow due to managing differing fund processing requirements for each funder; dealing with single contractor invoices across multiple funders; definitions of 'community' differing between funders; and general complexities arising.

10.11 Some stakeholders were realistic of the current funding climate and the need to ensure that funding schemes could support as many projects as possible. They therefore understood the reasons for considering a potential co-funding requirement. Other pros and cons of including co-funding are described in Table 10.2.

Table 10.2: Pros and cons of including a requirement for co-funding in a future CCF (or similar fund)

Pros	Cons
CCF would be able to fund more projects	Could result in 'good projects' not proceeding if additional funding cannot be found
Groups would not be reliant on one funding source	Harder for smaller organisations (in particular disadvantaged groups) due to increased administration
Brings in different partners, support networks, and could develop local 'consortia' or links	Risk of prioritising better-funded, better-staffed organisations with the resource to apply to multiple funds over 'better' projects
May encourage groups to develop more innovative projects

Loans and revenue-generation

10.12 The possible inclusion of a CCF loan funding element, and the related issue of revenue-generation in order to repay any loans, were also explored with respondents. Few CCF groups that participated in the research had any experience of loans or revenue-raising activities; indeed, many mentioned that income generation, the opportunity for which was introduced as part of the refresh explore theme, was previously prevented in the CCF.

10.13 Some groups expressed significant concerns about the prospect of moving away from a free service for their community (funded via CCF) to generating money from services they delivered, and felt that this may be a significant barrier to taking projects forward with their target audience. Others highlighted the low potential for income generation for many projects and for many activity types currently funded by the CCF. Some also mentioned that they felt it was contrary to the values of the CCF to generate income, and that its inclusion would move the focus away from carbon and community towards income. Other concerns related to the challenges of relying on volunteers to deliver a paid-for service; the added pressure on groups that the requirement to generate funding would cause; and the additional skillsets required to manage an income-generating organisation.

10.14 However for one group, becoming self-sustaining was very much their aim and they were positive about moving forward towards income generation. Others (in particular some stakeholders) felt that income generation was a positive and could encourage groups to establish as a social enterprise and to operate sustainably (in financial terms).

10.15 Given this context, loan funding was not felt to be appropriate for a future CCF or any successor scheme by almost all respondents. The key challenges to a loan funding approach related to concerns about leaving a community in debt, related personal risks of taking out loans on behalf of a community, the lack of assets available to most groups to secure a loan and implications of defaults on a community. One respondent remarked, on the inclusion of loans: "I think loans would frighten a lot of people, or a lot of communities, off" [CS17]. A summary of the pros and cons of loan funding is presented in table 10.3.

Table 10.3: Pros and cons of including loan element in a future CCF (or similar fund)

Pros	Cons
Help groups to establish as a social enterprise as a legacy of the project	Concerns from groups: Ability to generate revenue; Implications of defaults Leaving community in debt Personal risk
Good if projects are able to generate income, e.g. renewables, shop, paid for service (but not an option for most)	Focus would fall on revenue-generation as opposed to the aims of CCF
Gets group on a positive business footing	Many unlikely to have assets to secure loan
	Change ethos and aims of CCF

Longer-term funding

10.16 The issue of longer-term funding emerged as a theme from the research. The majority of community groups would prefer the option of longer-term funding (i.e. greater than three years) for their projects. From an organisational perspective this was felt to give greater continuity for the staff and the community along with more time to enable business plans to be formed and give the organisation direction. Many respondents acknowledged the length of time needed for behaviour change and felt that longer projects would allow more time for building relationships and establishing trust within the community, embedding project delivery, planning advertising and integrating messaging and collecting data on lasting changes. As one stakeholder described: "…are you better funding ten projects for a longer period, and more deeply, rather than spreading the funding very, very widely" [SH16 R1].

10.17 However, for some case study and stakeholder respondents three years was felt to be sufficient. Shorter projects were felt to be more focused and manageable and others suggested that it should not be the role of the CCF to provide ongoing financial support to groups.

10.18 Discussions on funding length and duration raised the issue of considering a 'two-tier' fund in a future CCF, for example a 'standard' fund for longer term projects and a 'quick response' fund for shorter more focused ideas. Others also commented that this could allow groups to apply for further funding if groups realised that their project could have a greater impact than previously thought.

Enhanced policy and programme links

10.19 Stakeholder respondents were asked to explore how CCF groups could support local or national priorities and how any future fund could complement national or local initiatives (e.g. national energy efficiency programmes) and wider partnerships.

10.20 Discussions with stakeholders (both internal and external to the Scottish Government) highlighted that there was no overall picture or 'map' of all agencies which fund communities in Scotland. In addition, awareness of the CCF was varied (and typically low) amongst the Government stakeholders contacted as part of this research. As such, detailed awareness of possible links between CCF project delivery and wider agency delivery was limited.

10.21 That said, there was a clear perception that there were opportunities for the CCF to support wider policy objectives (for example directly supporting the national retrofit programmes for energy efficiency, or supporting local authority programmes to foster recycling by directly engaging with communities). However, the lower levels of awareness of the CCF by Government stakeholders highlight that the fund is not seen as a strategic delivery partner for some of these policy areas at a local level. Despite this, discussions with stakeholders (both internal and external to the Scottish Government) highlighted that there is a role for bottom-up, community-based activities to support the uptake of climate change-related policy area activities and behaviours, including, for example:

• Encouraging participation in active travel or low carbon travel initiatives such as car clubs, walking and cycling routes and cycle hire schemes
• Supporting and encouraging householders to participate in the national energy efficiency programmes and to undertake energy efficiency retrofit activities in general
• Supporting associated behaviour change activities and agencies (such as HES) to foster energy efficiency in the home
• Promoting and increasing participation in local authority recycling schemes
• Building capacity in community groups to participate in larger sustainability projects such as community energy and local energy systems
• Promoting and developing the use of green spaces and local growing

10.22 The fund in its current form is not explicitly linked to wider Scottish Government policies or initiatives, although it clearly supports these at a local level, and there are clear links from the project theme areas promoted by the fund (i.e. community-owned buildings; energy efficiency; food; transport; waste; innovation; adaptation and resilience). Despite these indirect links, many respondents felt that there is scope for better integration and for policy areas or government departments and agencies to more proactively engage with the CCF (and vice versa). It was however acknowledged by one stakeholder that Government has a responsibility to direct funding to organisations best-placed to deliver these outcomes (which may not necessarily be community groups) and that this should be taken into account when considering a future fund.

10.23 In addition there were some suggestions that national organisations, both in terms of climate change-related activities and community-focused organisations, could proactively foster partnerships with CCF and related groups. In particular this should focus on developing or fostering follow-on activities to stimulate and engage groups in the longer term.

Summary: Future of CCF

10.24 In terms of the key elements that could be retained in a successor scheme, the research findings suggest that an option for innovation and the focus on disadvantaged groups should be retained, but not to the exclusion of all alternatives. It was felt that there should be scope for groups to continue to deliver similar projects without the need for innovation, should a clear need or demand be presented.

10.25 Co-funding and revenue-raising approaches were supported, but it was felt that these should be an option rather than a requirement of a successor fund. It was not felt that loans were appropriate for CCF-type projects due to the limited assets of community groups and the limited ability for many CCF-type projects to generate income.

10.26 There was also a need identified to tailor any successor scheme more explicitly to link with other Scottish Government policy areas, targets and initiatives.