On 20 May 2020, the Coalition for the Energy Efficiency of Buildings (established by the UK government and City of London Corporation-backed Green Finance Institute, in which TLT is involved) published its first report on scaling-up retrofit financing.
The report demonstrates the urgent need to increase the pace and scale of investment into the energy efficiency and resilience of UK residential buildings, and sets out a portfolio of financial solutions to catalyse take-up on a national scale, with the potential to contribute substantially to a post-Covid-19 green and inclusive economic recovery.
Publication of this report marks the start of a period of intensive work to pilot a series of new retail financial services products to demonstrate their viability, with a full launch later this year.
The transition to a green economy is a global challenge, presenting significant economic opportunities. As public awareness of this issue rises, development of green financial services products represents a growing opportunity for retail financial services firms to meet increasing consumer demand. There is a shift in consumer focus from how much a product costs to its cause.
This report provides a catalyst for consumer finance providers to explore the product development opportunities in this market. It means they are no longer starting with a blank piece of paper.
Climate breakdown is not the only global crisis we currently face and understandably the consumer finance market has been focused on responding to the Covid-19 crisis in recent weeks.
The construction sector is also facing significant challenges and would be a central pillar of a longer-term green stimulus plan.
The UK is the first developed country to have legislated a net zero emissions target for 2050. This ambitious target cannot be delivered without changes to regulation and significant investment.
Further policy announcements are expected later this year including the National Infrastructure Strategy, Spending Review and Heat Strategy which are likely to help unlock the opportunity.
Future announcements are expected from the financial regulators later in the year on their support for initiatives to encourage growth of the green fintech sector. There will be significant opportunities for fintechs, who will be clamouring to launch platforms – potentially in partnership with energy companies – that make it easy as possible for consumers to access the right financial products for their needs, whether that’s installing solar panels or insulation. Product development teams will benefit from the lessons they have learnt from previous new product launches, and build this into their green finance product strategies.
Across the UK there are a significant number of initiatives and targets relating to energy efficiency and building standards, seeking to contribute to the roadmap for reaching economy-wide net zero emissions by 2050.
Ready availability of private finance is critically important to this. Product development in the market has been slow to date, in part we understand due to limited data on the market opportunity. The portfolio of ‘demonstrator’ financial products to be piloted by the Green Finance Institute is likely to accelerate this, as the demonstrators include projects that will create the ‘enabling’ conditions needed by other financial products and by removing some of the barriers faced so far.
Housing is key for meeting decarbonisation and climate resilience ambitions. We see a real opportunity for the retail financial services sector to be at the forefront in efforts to drive up the energy efficiency of residential property, particularly as part of its economic recovery from the coronavirus pandemic. Publication of this report is likely to mark the start of a race across the retail financial services sector to develop a new range of green consumer finance products.
TLT continues to work with policy makers (as members of the Green Finance Institute’s Coalition for the Energy Efficiency of Buildings and EU Energy Efficient Mortgages Initiative) and financial services firms to accelerate the development and launch of green and sustainable finance products.
Members of our specialist green finance sector team would be delighted to discuss with you opportunities for development of green finance products in the retail financial services sector and the associated legal and risk considerations.