The recent British Property Federation discussion – Is Real Estate Finance Going Green? – took place in the shadow of COP 27, with speakers from BlackRock, Lloyds Bank and Greengage Environmental discussing green financing.
The panel communicated a desire and commitment from both funders and investors to drive forward the environmental, social and governance (ESG) agenda. This is reflected in increasingly common ESG commitments, such as those from the Net Zero Banking Alliance, and those with dedicated funds and products on offer.
Despite the growth of green financing, including sustainability-linked loans, there is still a strong need for regulation and an independent science-backed accreditation of standards.
Green accreditation is currently very subjective. It is, therefore, critical that standards are applied throughout the funding process and monitored. Data and transparency are key to this and the development of science-based metrics that can be utilised for assessing performance.
The central challenge will be getting green finance into brown assets, with a focus on retrofitting or regenerating the over 70% of all buildings that will still be in use in 2050.
There needs to be room for transitional targets, for buildings to become “more sustainable” via active asset management.
There was a consensus that what is not measured cannot be managed. In England and Wales, change is on the horizon with the Minimum Energy Efficiency Standards effective from 1 April 2023. The position in Scotland is different, with as yet no minimum EPC rating for commercial lettings.
Overall, there was appetite for delivery via regulation rather than policy, and a desire to bridge the intention to action gap when it comes to decarbonisation.