Introducing property linked finance (PLF) to the UK market could enable billions of pounds to be spent on improving the energy efficiency of the UK’s homes and commercial buildings, according to a new report from the Green Finance Institute (GFI).
PLF, a financial solution not currently available in the UK, is based on the US Property Assessed Clean Energy (PACE) model, which has enabled more than $13bn of capital to be invested in making homes and commercial buildings greener and more resilient, according to US trade body PACENation.
An estimated £360bn of investment is required to upgrade the UK’s inefficient buildings by 2050 and according to the GFI, developing and introducing PLF to the UK market in collaboration with the finance and retrofit industries could enable between £52bn and £70bn of private capital to be spent on upgrading 2.1 million EPC D rated and below owner-occupied homes.
PLF enables property owners to fund up to 100% of energy efficiency upgrades upfront and the finance is linked to the property, rather than the property owner, which means the payment obligation transfers to the new owner when it is sold.
Emma Harvey-Smith, programme director at the Green Finance Institute, said: “Introducing property linked finance to the UK market could channel billions into improving the energy efficiency of the UK’s homes and buildings. The GFI first identified PLF as a solution in 2020 and looks forward to working with the finance and retrofit sectors to bring forward a scalable and customer-centric model for PLF that will support the UK’s net zero ambitions.”
Alastair Mumford, programme director at the MCS Foundation, added: “Property linked finance could be transformational for upgrading the UK’s housing stock at scale to be more energy efficient, more affordable to run, and greener. Enabling a flexible PLF offering could help millions of homeowners to benefit from retrofitting their homes while helping the UK meet net zero goals. This new report should prompt the introduction of scalable model for PLF across the UK.”
Amol Mehra, director of industry programmes at Laudes Foundation, said: “We cannot stay in line with the 2015 Paris Agreement if we do not reduce emissions in the built environment. Property owners need innovative new products to help incentivise transition of their real estate assets. Laudes Foundation works with the Green Finance Institute because they are specialists at developing innovative new concepts to shift markets, such as property linked finance in the UK, which can drive decarbonisation at scale.”
Stew Horne, head of policy at Energy Saving Trust, added: “With more than 15 million homes across Great Britain classed as energy inefficient, retrofitting is a challenge that must be addressed. We know that homeowners are becoming interested in upgrading the energy efficiency of their homes, however the upfront costs of making these improvements is a reoccurring barrier.
“It’s therefore hugely encouraging to see the Green Finance Institute’s latest report underlining the transformational impact that property linked finance could have. This innovative solution could unlock huge amounts of investment and provide people with attractive financial offers by linking funds to the property rather than the property owner. Developing long-term, green finance products such as this will be crucial in making retrofit affordable to many more households.
“Better insulated homes will in turn reduce the UK’s overall demand for energy, which will improve energy security, bring down energy bills and accelerate the transition to net zero.”
