The Green Finance Institute (GFI) is calling for the introduction of property linked finance (PLF) in the UK to release billions of pounds worth of investment into improving the energy efficiency of buildings in the country. 

PLF, a financial solution not currently available in the UK, is based on the US Property Assessed Clean Energy (PACE) model, which has enabled the investment of more than $13bn of capital in making homes and commercial buildings greener and more resilient, according to US trade body PACENation.

In a report, GFI argues the PLF could unlock up to £70bn (€80.7bn) of private capital into upgrading UK homes if introduced.

The GFI report highlights that the UK has some of the oldest and least energy-efficient homes in Europe, with buildings responsible for 23% of the UK’s annual greenhouse gas emissions. The Climate Change Committee estimates that future-proofing UK buildings will cost £360bn before 2050.    

GFI said developing and introducing PLF to the UK market in collaboration with the finance and retrofit industries, has the potential to enable between £52bn and £70bn of private capital into upgrading 2.1m EPC D-rated and below owner-occupied homes.

PLF would enable property owners to fund up to 100% of energy-efficiency upgrades upfront. The finance would be linked to the property, rather than the property owner, meaning the payment obligation transfers to the new owner when sold.

GFI said property owners would only pay for energy efficiency measures until they sell their property, while new buyers benefit from a more energy efficient, potentially more valuable property, in return for continuing to make regular payments towards the upgrades.

GFI said it was committed to collaborating to the development of PLF in the UK, with the potential to expand to Europe and beyond. To date, GFI’s work on PLF is funded by MCS Foundation, Laudes Foundation and Amalgamated Bank. The institution is also supported by research firm Globescan and law firm Osborne Clarke.

Emma Harvey-Smith, programme director at GFI, said: “Introducing PLF 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, said: “PLF 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 the transition of their real estate assets.

“Laudes Foundation works with the GFI because they are specialists at developing innovative new concepts to shift markets, such as PLF in the UK, which can drive decarbonisation at scale.”

Stew Horne, head of policy at Energy Saving Trust, said: “With more than 15m 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 recurring barrier. It’s therefore hugely encouraging to see the GFI’s latest report underlining the transformational impact that PLF 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.”

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