Greening our homes: it's heads or tails time for the mortgage industry

Now more than ever, there is a sharp focus on financial services and mortgage lending and the vital role they can and should play in ensuring our homes are fit for a sustainable future. 

Political and public pressure, as well as the loudly-ticking countdown to net zero carbon targets by 2050, means there is an imperative to act. 

Financial services and mortgage lending are entering a period of transition that will need decisive action. There are increasingly moves from carbon-intensive investments and assets to those which are sustainable and demonstrate strong environmental, social and governance credentials. 

The industry response to current sustainability challenges will be key in determining its future direction. The coin is spinning, but will it be heads or tails for mortgage lenders? Will the industry proactively rise to the challenges or react to the interventions and demands of others?

Happily,  this is more than a game of random chance. Lenders are already shaping their role and contribution in response to growing customer demand and expectations for action to green our homes, reduce their carbon impact and build back better from the pandemic.

Across the industry, new approaches and products are being developed to provide demonstrably green and sustainable finance and financial products that deliver verifiable environmental benefits.

There are clearly challenges in this. On the financing side, the industry and regulators must be clear about what is genuinely ?green? rather than ?greenwashed?. On the consumer side, there will need to be certainty of demand for new products and innovations. Retrofitting an existing home can be daunting for owners and landlords - knowing what improvements to make and which measures to install to maximise environmental and energy performance gain for their investment.

Policymakers in governments across the UK are developing initiatives and interventions to encourage and in some cases require homeowners and lenders to act. 

In Westminster, proposals are being developed for a new regime of lender disclosures and targets for the energy performance ratings of properties they lend against. In Holyrood, a new Heat in Buildings strategy will see a regulatory framework requiring homeowners not only to achieve energy performance targets but also to install zero-carbon emissions heating in the coming years.

It is important that initiatives and requirements such as these align wherever possible and avoid unintended consequences for the housing and mortgage markets while also supporting households that are fuel-poor. 

I will be discussing how complex issues such as these can best be addressed in a panel discussion with industry and government experts at our 2021 Mortgages Conference on 5-7 May. Join us at this virtual event to hear their views, ask your questions and see which way the coin lands for mortgage lenders.

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