matthew tooth

Fail to go green and you'll be left red-faced

The opening months of 2020 have featured a succession of events that make clear the climate emergency we face.

Although the news focus has moved on to other matters, the long-term challenge for businesses and the societies they operate within to address the present climate emergency will not go away.

From Storms Ciara and Dennis to the fires in Australia, it’s been difficult to escape the reality that something has to change. With the chancellor’s clear ambition to take on the challenge of decarbonisation detailed in this week’s budget and capitalise on the opportunities to become leaders in the green markets of the future, it’s safe to say sustainability is at the top of everyone’s agenda.

The financial services industry has a big role to play here. Last year the government published a green finance strategy emphasising the need for businesses in this sector to think creatively about what we can do to support environmental efforts.

It suggested this could happen through three avenues. The first is by ‘greening’ finance, making the way that we operate as financial services firms more environmentally responsible.

From there, we can do more to financially support the initiatives that will improve our nation’s ability to meet carbon targets, with the final step of meeting the opportunities that arise from both the ‘greening of finance’ and from ‘financing green’.

But what does that mean in practice?

Putting your money where your mouth is

It’s not enough to simply talk a good game when it comes to environmental matters — you have to walk the walk as well.

That’s why we have launched our first green finance initiative, a cashback offer for borrowers on our bridge-to-let loans when they improve the energy efficiency of a property during the term of the deal.

Up to £600 in cashback is available, depending on the size of the improvement in the energy performance certificate (EPC) rating, with the cashback then netted against the loan redemption amount at the end of the term.

The issue of energy efficiency is a significant one for landlords currently, with the minimum efficiency standards being rolled out to more tenancies. Up to now, landlords were required to ensure that any new lets only took place in properties with an EPC rating of E or above.

But from April this is being extended to all existing tenancies too, with landlords required to spend up to £3,500 per property to improve the efficiency of any property with an F or G rating.

This is just the first of a series of green finance initiatives that we have planned in order to help our borrowers have a more positive environmental impact.

A helpful nudge

The fact is that while most of us accept that we do need to make some changes to the way we operate in order to be more environmentally conscious, that knowledge on its own is not always enough to spur the necessary changes.

Instead, we need more of a helping hand, a nudge, to get us on to the right course, and that’s where the financial incentive of the cashback comes in.

For landlords, getting their properties up to the right efficiency standard is, therefore, not just the right thing to do from a legal and ethical perspective, but it brings with it a financial boost to boot.

And as landlords across the UK are pushed into improving the energy efficiency of their entire portfolio, it means that tenants can enjoy a higher standard of properties, and the environment benefits, too.

In our business, a significant portion of our lending goes to investors who have seen the opportunity to add value to a property that is perhaps a little unloved, and in a distressed state.

It’s incredibly rewarding to know that some of the funding we provide each and every day is going towards improving the standard of this older stock, to the point that it not only provides a tenant with somewhere pleasant to live, but also lessens its impact on the environment.

Show off your credentials

The world is changing, and customers want to see financial firms demonstrate their green credentials. But up to now there have been far too few steps taken to make the mortgage market greener. It has all been too hesitant.

That has to change, and as an industry, we all need to do far more to take our environmental responsibilities seriously. Going green is not just a fad, it’s a necessity.

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