The journey to net zero

Ahead of COP26, we look at the journey towards net zero, and the focus of our members on our homes which are responsible for a signifcant proportion of carbon emmissions. 


This Sunday (31 October) will see some 25,000 people start to gather in Glasgow for the start of COP26.  COP stands for Conference of the Parties and it is just that, a United Nations gathering to discuss (and hopefully agree) on matters related to climate change. This is the 26th such gathering, with the first in Berlin in 1995.  After COP21 in Paris and the signing of the Paris Agreement COP26 is arguably the most important yet, as the time available for effective action ticks by. 

Colin Fyfe, Chief Executive of Hinckley & Rugby Building Society and Chair of the BSA’s Green Finance Taskforce will be taking part – he is a panellist at an event at COP26 on 3 November, to be hosted by the Green Finance Institute on the subject of decarbonising the UK’s housing stock and how to pay for it.  (if you are interested in attending this virtual event between 12:00 and 13:00 you can register here.)     

Most people will also be aware that COP26 has for the past few months had the undivided attention of Alok Sharma MP who was appointed its President by the Prime Minister in January.  Since then his feet have barely touched the ground – literally – as he rallies support for meaningful action from world leaders to significantly reduce emissions by 2030 and reach net zero by 2050. The hope is there, but the jury is out on how effective COP26 will be.  It concludes on 12 November but outcomes will be measured over months and years.    

As well as emissions there is also a pressing need for governments to support populations to adapt to climate threats.  These vary country to country: from droughts to rising sea levels plus.  In the UK, the most visible need relates to flood resilience – we have all seen the images of communities under water, some more than once.  Clearly hugely distressing on an individual and community level as well as economically damaging and a top-level risk for lenders and insurers and much on the mind of the Bank of England. 

'Adapt or Die'

On 13 October, the Environment Agency published a frankly scary report under the headline ‘Adapt or Die’.  It highlights the pressing need for the places we live and work in, as well as how we travel to be made resilient to the more frequent and violent weather that we can expect to see and the effects these changes will have on rainfall, river flow and sea-levels.

Emma Howard Boyd, Chair of the Environment Agency said: “While mitigation might save the planet, it is adaptation, preparing for climate shocks that will save millions of lives. Choosing one over the other on the basis of a simple either/or calculation is like telling a bird it only needs one wing to fly.”

Whilst this whole topic can feel overwhelming, there are many small but meaningful actions being taken by individuals and businesses already and these are massively important.  No one should fall prey to the feeling that “nothing that I can do will make any difference”, it all adds up.

Decarbonising our homes

Amongst BSA members, the focus is particularly on mortgage assets, our homes which are responsible for a healthy chunk of all carbon emissions. Of course the homes being built now must and should be energy efficient, the need to do further work to bring them up to standard later seems crazy.  But, around 80% of all the homes that will be in existence in 2050 have already been built so existing homes are clearly critical.

Already around ten building societies are offering mortgages which either seek to incentivise those buying more energy efficient homes or help those looking to improve the energy efficiency of the home that they already have.  However, consumer take-up is low so there is clearly much more to do if the UK is to achieve pace in retrofitting around 29 million homes.

On 19 October the Government published its long awaited Heat and Buildings Strategy.  There was a fair amount of focus on Heat Pumps with the Government intending that its actions in providing £5,000 grants for early adopters will help kick start the market and drive up production to 600,000 annually – a third of which are likely to end up in new-build homes.  There is recognition that as the market develops the units need to get smaller and “more beautiful”, and certainly cheaper.  It is hard to see mass adoption until installing a heat pump is on a par with a new gas boiler both in terms of cost, disruption and effectiveness.

The Government tipped its hat to a lot of helpful moves – the need for the approach to be fabric first (aka insulation); the recognition that improvements needed to be appealing to the consumer and that raising consumer awareness was critical amongst them.  

For the media lots of air time was given to the impact on the availability of mortgages for less energy efficient homes.  The situation is not quite as portrayed, but certainly there is lender concern about the possibility that it could become mandatory that a lenders mortgage book be average EPC C by 2030.  With 60% of homes below that level right now you can see the difficulty, one with some potentially nasty and damaging unintended consequences for individuals, lenders and the economy.  No one would benefit from a two-tier housing market – particularly when achieving a ‘Just Transition’ for all in society is recognised as being critical.   I sincerely hope that we never see people trapped in homes that they cannot sell because they can’t afford to uprate the EPC and lenders can’t lend to a potential buyer (who can).

Lenders now await the Government response to the consultation Improving Home Energy Performance through Lenders which closed in February this year.  Beyond what was included in the Heat and Buildings Strategy we look forward to clarity on things like the methodology government will use to set voluntary improvement targets for lenders, how this will be monitored and what would trigger a move towards mandatory targets?  Watch this space!

In the meantime, we have seen some practical and welcome developments from the Green Finance Institute’s Coalition for the Energy Efficiency of Buildings this month, both are geared to improving knowledge and education, amongst the lending community and consumers:

The ‘Lender’s handbook on green home technologies’ 

This handbook aims to provide, relevant, up-to-date information on the green home technologies their customers may want to fund.  It’s practical and will aid understanding of the key energy efficiency, heating, microgeneration and resiliency technologies available to homeowners, all to be updated annually. Users get a snapshot of each technology, including the current costs, carbon savings and benefits, as well as profiling the main funding options, quality assurances and guarantees to protect customers.

At the launch, the BSA’s head of Mortgages and Housing commented: “We often hear phrases such as retrofit plans, or low-carbon technologies, without always knowing what these are or how they work in practice. This Handbook provides vital information for mortgage lenders looking to understand more about how to help customers decarbonise their homes, it fills an important knowledge gap. Looking forward we also need government to help educate the public and provide clarity on how they will support them to improve the energy efficiency of their homes.”

Industry-created guidelines for Building Renovation Plans/Passports

As the property sector takes stock of its contribution to the task ahead to achieve net zero, a tool is emerging to help individual and institutional property owners understand their property’s current energy efficiency and provide a roadmap to improve it.

First recommended by the UK Climate Change Committee (UKCCC) and the UK’s all-party Environmental Audit Committee in 2019, Building Renovation Plans (BRPs), also called Building Renovation Passports, will give users a clear snapshot of a property’s current status and recommend the steps needed improve energy efficiency, signposting consumers to verified tradespeople and suppliers and to sources of financing. This month the Green Finance Institute’s Coalition for the Energy Efficiency of Buildings (CEEB) launched a framework to help introduce BRPs into the UK market, created with input from organisations and experts from the property, retrofit, energy, finance and data sectors, as well as local authorities and social landlords.

The framework outlines good practice and recommendations for businesses developing BRP propositions, as well as those supporting their introduction. It sets out the key information inputs and outputs required in a BRP, as well as guidance on data governance.

Santander launched its EnergyFact report, in partnership with CountryWide Surveying Services some time ago.

This new framework is expected to catalyse the development of other similar tools for homeowners, with the Residential Logbook Association member companies launching a first generation of BRPs within property logbooks by the end of this year.