Green Home Retrofit Finance Principles spearheaded by Green Finance Institute aim to 'strengthen integrity of retrofit finance market'
A group of leading banks and property industry bodies have thrown their weight behind a new set of standards for financing green building upgrades, in a move spearheaded by the Green Finance Institute that is aiming to unlock much needed capital for retrofitting the UK's draughty homes and offices.
Launched yesterday, the Green Home Retrofit Finance Principles (GHRFPs) have been produced in collaboration with the Loan Market Association (LMA) in a bid to strengthen the integrity of the retrofit finance market, according to the Green Finance Institute.
It said the Principles would provide a "vital" transparent and consistent industry framework for financial institutions to use when considering lending for green home upgrades, and as such would help support the government's £3bn Green Home Grants Scheme for which applications are now open.
Covering four areas - the use of proceeds, process for project evaluation and selection, management of proceeds, and reporting - the GHRFPs are intended to guide financing for energy efficiency retrofit upgrades such as insulation and heat pump installations in owned and rented properties.
In order to be considered a 'green home retrofit financing', a transaction must align with these core components and standards, although the GHRFPs "are not designed to take a position on the green technologies and standards per se", the Green Finance Institute explained.
The GHRFPs have already won the backing of Lloyds, NatWest, BNP Paribas, the Ecology Building Society, UK Finance, Coutts, the Building Society Association, Adam & Co, the Newbury Building Society, Hinkley & Rugby Building Society, and the Saffron Building Society, among others.
Dr Rhian-Mari Thomas, chief executive of the Green Finance Institute, said there were clear benefits to having a set of agreed standards ratified by industry, adding that the Principles would give the market "clear guidelines on how to process and track lending for energy efficiency works".
"The formulation of the Principles is a key enabler for many of the Green Finance Institute's Coalition for the Energy Efficiency of Buildings' [CEEB] initiatives, to be presented later this year in a second-phase report alongside outputs from the recently-convened Zero Carbon Heating Taskforce," she said.
Unveiled as part of the Chancellor Rishi Sunak's summer economic update in July, the government's Green Homes Grant Scheme is expected to deliver green home improvements for over 600,000 households, while creating an estimated 100,000 jobs in the green building sector.
The grants are set to cover up to two-thirds of the cost of green home improvements to householders with grants capped at £5,000, although low income households can qualify for grants worth up to £10,000. Traders must register for accreditation to take part in the scheme.
However, campaigners have warned that far greater action and support is needed to tackle the UK's chronically inefficient housing stock and help meet the UK's 2050 net zero target. On Friday, think tank Green Alliance argued VAT should be reformed in order to help accelerate the rollout of green home upgrades, proposing the Treasury should raise the tax on heating gas in order to help pay for insulation in poorer households.
Nick Mabey, chief executive of think tank E3G - a member of the CEEB which played a role in the development of yesterday's new GHRFP standards - said significant public and private investment was needed to underpin energy efficiency and zero carbon heating solutions.
"Homes are at the heart of our society, yet their contribution to climate breakdown often flies under the radar," he said. "The Green Homes Grant offers an exciting opportunity for lenders looking to launch green finance products, and we hope the new Principles provide a firm foundation to help ensure market integrity."
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