The government endorsed the Task Force on Climate-related Financial Disclosures’ recommendations in 2017 and made their implementation a central part of the Green Finance Strategy. The Bank of England’s own climate strategy is structured around three themes: risk, reporting and return and encompass the physical asset risks and the transition risks of financial institutions moving to a net zero carbon business model.  

In terms of mortgage lenders’ physical risks, data is playing a huge part in understanding the scope of the problem and the corrective action required for loans on back books as well as originations. It can also inform our notion of value.  

Home energy use accounts for nearly a fifth of the UK’s total emissions and in the UK, in fact much more in lockdowns and working from home. 36% of UK homes were built before the end of the second world war and at least 75% is predicted to still be in use by 2050. This aging stock will need huge amounts of work if we are to reduce its energy demand. 

The Committee on Climate Change, which advises the UK government on its legally binding climate targets, recently recommended that all homes for rent or sale should have to achieve a C rating by 2028, and that all homes should be aiming for this by 2035. 

The judgements we make will need to be based increasingly on the evidence of a property’s energy performance and the user’s role in this. We have one such measure at the moment – the Energy Performance Certificate (EPC). It is not perfect, but it is a universal starting point that people are relatively familiar with and which appears to measure the thing that we need to improve.   

I will deal with the specific merits of the EPC in another article but, for now, a broader point is important. The only way we can equip people to make sound decisions and, crucially,  measure our collective progress is through data. It’s no exaggeration to say that all climate related work needs to deliver measurable improvement that can inform the valuers’ and lenders’ forward-looking views. Demonstrable progress for regulators, stakeholders and society will be as important as defensible decisions.  

Climate-related metrics and targets, based on sound data, should inform and be informed by lenders’ own governance, strategy, and risk management processes and create a loop over time in the same way that other Key Performance Indicators (KPIs) and Key Risk Indicators (KRIs) are used. Ultimately, data and measurable outcomes will provide the link between the TCFD recommendations and lenders’ disclosure of its climate-related plans, performance, and position. Things that inform regulators but will also drive understanding of business value. 

We are not in completely unchartered waters here, but we are in the midst of a huge work in progress. Reliable, robust data does exist, and it is the job of companies like our own to curate it to support the objectives of valuers, surveyors, and lenders alike. It’s our experience that data is at the heart of supporting decision making in this crucial area going forward. 

Mark Blackwell, Chief Operating Officer, Core Logic UK