The report, Financing energy efficient buildings – the path to retrofit at scale, has been released by the Coalition for the Energy Efficiency of Buildings (CEEB). This was set up by the Government and the Green Finance Institute in December 2019 and consists of 52 cross-industry member organisations including mortgage lenders.

Proposals

The 21 ‘demonstrators’ include financial, data and standards-based solutions to overcome barriers to scaling up finance, as well as assessment and policy levers that could bolster the commerciality and scalability of these solutions.

The Coalition will now take forward a selection of these pilots, enabling a practical demonstration of their viability with their launch later this year. The demonstrators fall into six groups:

• Lending products – including Property Assessed Clean Energy (PACE) loans, equity release mortgages
• Savings and investment products – including community municipal bonds and ISAs
• Guarantee mechanisms – backed by the Government or by insurance companies
• Tenancy agreements – green leases
• Energy service products – enabling housebuilders to recoup investment
• Data and enabling frameworks – including building renovation passports and standardised energy saving methodologies.

Comment

Dr Rhian-Mari Thomas OBE, chief executive of the Green Finance Institute and chair of CEEB, said: “In the UK, our built environment is responsible for almost 30% of total greenhouse gas emissions.

“And yet this sector has significant potential to decarbonise and unlock wider benefits across the economy: energy savings that increase consumer spending power, healthier homes that reduce the burden on our health system, and the creation of new skilled jobs that can help stimulate the UK’s economic recovery.”

The Rt Hon Kwasi Kwarteng MP, Minister of State, Business, Energy and Clean Growth, commented: “The work carried out by the Coalition for the Energy Efficiency of Buildings represents a positive step towards achieving our Green Finance Strategy ambition to build the market for green home finance.

“The proposed demonstrators aim to support the development of innovative products to finance energy efficiency and build a vibrant market for energy retrofit. This will support the UK in delivering its commitment to move towards net zero whilst growing our economy.”

Adapting to the impacts of Covid-19

Paul Ellis, chief executive of Ecology Building Society said: “Responding to the climate crisis by retrofitting existing homes supports both the transition to a zero-carbon economy and the creation of new jobs which will be critical as we adapt to the impacts of Covid-19.

“Ecology has been providing green mortgages, funded by our members who support our sustainable lending policy, for nearly 40 years. We’ve proved that incentivising energy efficiency through our unique C-Change discounts works by basing our mortgage rates on a property’s climate impact.

“We particularly welcome the focus on gathering data to develop the solid evidence base that lenders, investors and the wider retrofit supply chain require in order to urgently deliver the tangible and practical solutions we need to avoid the catastrophic human and ecological impacts of the climate crisis.”

Opportunity for change

Colin Fyfe, chair of Building Societies Association Green Finance Taskforce and chief executive of Hinckley & Rugby Building Society, commented: “The Green Finance Institute and the Coalition for the Energy Efficiency of Buildings, in which we are involved, is making good progress.

“As we think about the future of our society, finance and the economy, I see a real opportunity for change that could open up new jobs and provide longer-term economic stimulus as we reduce carbon emissions and heating bills.”

Incentivising consumers

Joe Garner, chief executive at Nationwide Building Society, added:  “The Green Finance Institute’s report is timely as our homes take on an even greater role at the centre of millions of lives following the outbreak of the coronavirus.

“The report will help policymakers, businesses and consumers overcome barriers across a wide range of issues, including how to encourage people to make their homes more energy efficient.

“Earlier this year Nationwide made £1 billion available for green home improvements to reduce the carbon footprint of Britain’s homes – because, as things stand, incentives for consumers are the only realistic way to help people make their homes greener.”

Giving lenders confidence to move ahead

Law firms are also involved in the Coalition and Robin Penfold, partner at TLT, said the report is critical to giving lenders the confidence and guidance they need to move ahead.

He explained: “The publication of this report is likely to mark the start of a race across the retail finance industry to develop tomorrow’s green finance products and secure their role in the green economic recovery.

“The report is part of a ‘holy triangle’ of conditions that are working together to drive the green finance market wide open. This includes new legislation to secure funding for the energy enhancement of buildings; a shift in focus amongst consumers from the cost of a product to its cause; and the removal of major barriers to new product innovation, which have been holding the industry back.

“Whereas historically there has been a lack of data on the market opportunity, the portfolio of ‘demonstrator’ products to be piloted by the Green Finance Institute in the coming months gives lenders a clear starting point for product innovation.

“It shows product development teams what the options are and how to do it. It means they are no longer working with a blank piece of paper.

“There will be significant opportunities for fintechs, who will be clamouring to launch platforms – potentially in partnership with energy companies – that make it easy as possible for consumers to access the right financial products for their needs, whether that’s installing solar panels or insulation.