Green Finance Strategy

Government’s Green Finance Strategy to tackle sustainable property

Technological innovation and integration underpin the Government’s newly released Green Finance Strategy. The GFS sets out how the UK aims to fund Theresa May’s recent promise to produce net zero carbon emissions by 2050 in an amendment to the Climate Change Act.

The report states that “transitioning to a lower carbon economy may entail extensive technology changes to address the mitigation and adaptation related to climate change.”

In property terms, the Government’s aspiration to upgrade homes to Energy Performance Certificate Band C by 2035, and for fuel-poor homes to reach this standard by 2030, would require between £35bn and £65bn. The funding for this would come from the mobilisation of significant private investment. The GFS calls for evidence in order to act to build the market for green finance products to support home energy efficiency. These actions include:

  • Publishing a consultation later this year on the merits of setting requirements for lenders to help households improve energy performance of homes
  • Update to the EPC data available through open data, and a commitment to update this at least every six months, to support lenders in driving energy efficiency by evaluating the EPC performance of their lending portfolios. Investigate how this data could be made available on a live basis as part of updating the EPC Register
  • Given support for the Pay as You Save approach, the Government will continue to explore further opportunities for simplification and improvement of the Green Deal framework to support the funding of energy efficiency measures
  • Sponsoring new technical standards to cover the end-to-end delivery of energy efficiency measures. The British Standards Institution published these standards in June. These will be embedded within the new TrustMark government-endorsed quality scheme, which large financiers have stated will improve the investment attractiveness of energy efficiency. It will also ensure consumers get what they are expecting and have suitable financial protections in place
  • Reviewing how the energy efficiency data, using the National Energy Efficiency Data-Framework, could be used to support innovative green finance product development

Jon Lovell from Hillbreak, advisor to institutional investors, commented on the property aspects of the GFS. He said that while the GFS is significant in relation to the green finance system through “enhanced mandatory disclosures, improved sustainable finance standards and clearer oversight responsibilities”, the financing “of climate and environmental solutions in property remain, for the most part tentative and subject to further consultation and investigation.”

He goes on to say “the new Strategy gives a strong signal of intent, with some notable measures, but it is lacking in the detail and level of commitment that owners and managers of commercial and residential property ought now to expect… Whilst there are several welcome elements within the Strategy, as a package of measures it falls short of the market transformation that is needed.”

The GFS, developed by the department for Business, Energy + Industrial Strategy, builds on the work of the Green Finance Taskforce report, published in 2018. The GFT set out recommendations on how the Government could unlock green finance and reduce emissions.

The GFT, along with another industry taskforce established by Theresa May in 2018, collaborated to progress the recommendations in the report to promote a more sustainable future. One of the key areas of collaboration identified was “the role of innovative technology.”

MPs Claire Perry and John Glen wrote in a foreword to the GFT that it wouldn’t be possible “to meet carbon budgets…without private sector investment in low carbon technology and infrastructure”.

The GFS states that becoming a zero-emissions country by 2050 would require investment at an unprecedented scale. “The International Energy Agency has estimated that $13.5tn of investment” in the global energy sector is needed between 2015 and 2030 to meet the Paris Agreement. The agreement aims to limit greenhouse gas emissions and prevent global temperatures from increasing more than 2°C from the benchmark temperature before the Industrial Revolution.

Energy companies like Bulb and Ecotricity are following suit. One of the Big Six energy providers, Eon, promised that 100% of its electricity supplied to 3.3m residential customers will come from renewable sources.

The GFS references the investments the Government has already made to reduce emissions and build climate resilience. This includes the investment of over $2.5bn into Climate Investment Funds since 2008. The largest subdivision of the CIF is the Clean Technology Fund which speeds up the deployment of clean technologies that reduce emissions by investing in companies which want to commercialise clean tech products. The CTF claims it has gained £7 from investment partners for every £1 spent, with around a third of the co-financing coming from the private sector.

Another Governmental strategy is the Clean Growth Strategy, which involves investment of £2.5bn between 2015 and 2021 to support low carbon innovation. The includes investment into the Industrial Strategy Fund, which since its inception, has helped establish companies such as Reed Thermoformed Packaging, producer of biodegradable food packaging to reduce waste, and Renovagen, which has created more manoeuvrable and easily accessible solar panels.

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