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GFI Report: Property Linked Finance has the potential to unlock up to £70 billion of investment for UK home energy efficiency improvements

28 November 2023: The Green Finance Institute (GFI) has released a report revealing that introducing Property Linked Finance (PLF) to the UK market could enable billions of pounds worth of investment into improving the energy efficiency of the UK’s homes and commercial buildings. 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. An estimated £360 billion of investment will be required to upgrade the UK’s inefficient buildings by 2050.

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 over $13 billion of capital in making homes and commercial buildings greener and more resilient, according to PACENation, the US trade body.

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

PLF would be an innovative financial solution for residential and commercial properties. It enables property owners to fund up to 100% of energy efficiency upgrades upfront. The finance is linked to the property, rather than the property owner. This means the payment obligation transfers to the new owner when it is sold.

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.

The report features the GFI’s design principles for a PLF solution in the UK:

  • The purpose of Property Linked Finance is to enable customers to make home energy improvements. For this to be done effectively, PLF solutions must be customer-centric.
  • Property Linked Finance ideally should be deliverable within the current legislative landscape, so that its operationalisation is feasible and practical.
  • For the widest possible reach and funding potential of the solution, the design of Property Linked Finance should be flexible and adaptable to different building tenures, geographies and capital providers.
  • A well-designed PLF solution must be scalable across the UK to maximise impact.

Combined with the right policies, regulations, retrofit technologies, consumer education and incentives, PLF can play an important role in upgrading the UK’s built environment.

The GFI has consulted international partners to learn key lessons on how to deliver a successful, scalable solution tailored for the UK market. The report features case studies from the Sustainable Australia Fund, and the US based Amalgamated Bank and Home Run Financing.

According to PACENation, the US trade body, PACE in the US has :

  • Enabled over $13 billion worth of investment across commercial and residential PACE
  • Made over 325,000 homes and buildings more energy efficient
  • Created 202,000 skilled job-years and generated $21.6 billion of economic impact

Emma Harvey-Smith, Programme Director, 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, said,
“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, 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 said,
“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”.

For any questions or to request an interview, please contact: Tim Le Couilliard, SEC Newgate:

About the Green Finance Institute
Established in 2019, the Green Finance Institute is accelerating the transition towards an environmentally sustainable and resilient economy by catalysing investment in net zero and nature positive outcomes

Uniquely positioned at the nexus of the public and private sectors, the Green Finance Institute is the UK and Europe’s principal forum for innovation in green finance. The Green Finance Institute partners with financial institutions, corporates, policymakers, academics, philanthropists and civil society experts to develop solutions that will redeploy capital at the pace and scale that science demands.

As an independent organisation, backed by government and philanthropic funders, the Green Finance Institute co-designs financial instruments and mechanisms as well as develops the enabling frameworks, guidance and policy ideas needed to support greater green investment.

What is PACE?
US Property Assessed Clean Energy (PACE) model lends up to 100% of the hard and soft costs for energy efficiency, renewable energy and resilience measures for residential and commercial properties. PACE is linked to the property and not the owner, with the finance transferring automatically upon sale. PACE is collected via property tax, but given the different tax jurisdictions the GFI believes a different collection mechanism may be required in the UK.

PACE case study
Amalgamated Bank provided financing to a family in Kissimmee, FL who wouldn’t qualify for conventional financing due to a low FICO credit score. Utilizing PACE financing, they were able to obtain $38,000 for essential flood resiliency updates and energy efficiency improvements to their home. Without PACE financing these improvements would have had to be financed through high rate credit card debt or other unfavorable terms. Utilizing PACE, the homeowner was able to pay for 100% of the improvements over 30 years through bi-annual tax payments [the method used to link PACE to a property in the US-at a reasonable interest rate.