Originally published in Society Matters magazine.

By Colin Fyfe, CEO, Hinckley & Rugby Building Society

The final day of the BSA virtual conference focused on business-led recovery and naturally included discussions on sustainability, net zero and green finance.

Dr Rhian-Mari Thomas of the Green Finance Institute set the scene with some hard-hitting facts - much of the climate damage has been exacerbated by humans.

The huge increase in CO₂ emissions in the past three decades demonstrates that we have caused as much damage knowingly as we had previously done in ignorance. She also highlighted that in the UK, buildings are responsible for 59% of all electricity usage and 23% of the total UK carbon emissions, with homes accounting for around 77% of this. 

It was therefore appropriate that the following panel discussion looked at the practical actions that the financial industry could and should take and what the experience was so far.  I was joined for this session by Luca Bertalot, Secretary General of European Mortgage Federation – European Covered Bond Council and William Carroll, CEO Monmouthshire BS.

There was clear agreement that retrofitting existing homes which represent circa 80% of all the homes that will exist by 2050 provides the biggest opportunity for change, with 19 million homes requiring improvement. At an average cost of £23,000, targeting new homeowners who generally have the greatest desire to renovate their home is likely to achieve the most success, with the mortgage provider being the essential link by making the funding available.

And of course it’s shocking that we’re still building homes that will need retrofitting in the next few years. The government’s New Homes Standard¹ aims to ensure all new homes are future-proofed with low carbon heating and world-leading levels of energy efficiency, hopefully this means we’ll soon stop filling the leaky bucket!

The biggest task in achieving action is educating consumers of the benefits an energy efficient home can offer, including lower bills (so more disposable income), reduced pollution in our communities and improved health benefits. This in turn should create an appetite to buy an energy efficient home or invest in a home retrofit.

It will only be possible to accelerate action against climate change if as an industry we work collaboratively with policymakers and regulators to change consumer behaviour. There were many ideas suggested, but the ones that struck me as having the most potential were:

• Building energy efficiency into affordability models – Luca quoted an average 50-70% reduction in energy costs for retrofitted homes
• Stamp Duty levies linked to EPC ratings
• Incentivise consumers through innovative green mortgage products
• Favourable capital treatment for green mortgages, reducing funding costs
• Lower VAT on energy efficiency measures

And we’re not doing this from a standing start. Since the first green mortgage was offered by the Ecology in 2006 there have been a number of initiatives.  Nationwide’s green finance mortgage rewards customers who have the most attractive EPC ratings, whilst Newbury Building Society rewards its customers who retrofit their homes.

Looking further afield, France is considering a law that will make any property transaction (rental or purchase) with a high EPC rating illegal.

It was clear to me that there is so much to do and building societies have a key role to play, but with a mix of innovation, collaboration and a desire for a better future for all, we can turn the nation’s attention on climate change into consumer action – and really make a difference.   

¹ New Homes Standard - Raising accessibility standards for new homes - GOV.UK (www.gov.uk)