From recycling your household waste, to switching to an electric car, to brands promoting long-lasting clothes over fast fashion - you are likely no stranger to a headline or two on the importance of going green. And this transition to sustainability is also embedding itself into the way we do business. Once upon a time, having a sustainable business meant keeping your accounts in the black and ensuring you had enough pipeline to pay the upcoming months' bills. However, since the birth of the green finance sector over 30 years ago, having a sustainable business can have a whole new meaning. Is your business ‘in the green’, and what are the risks of overlooking this paradigm shift in the market? A quick refresher on some of the facts: The Paris Agreement legislates that the UK is mandated to achieve Net Zero by 2050. Buildings account for 23% of the UK’s overall carbon emissions. In order to improve our hosing stock to the level required by 2050, the Climate Change Committee estimates that investment of £250 billion is required. Where could that money come from? It could come from government grants or subsidies; however, it is widely accepted that government money alone will not meet the significant funding gap. The reality is that a substantial portion of the investment needed will rely on finance from the private sector. When homeowners are looking for finance in relation to their home, from purchases to home improvements, where do they turn? Often, to their mortgage advisor. The mortgage industry has long been known for its adaptation and flexibility in meeting the needs of the customers of tomorrow. On the subject of green mortgages, the complexities and scale of the investment required to decarbonise housing stock adds additional blockers to innovation that the market is still grappling with. Is the solution products which integrate home upgrades as part of the mortgage journey? Could whole home assessments be the answer? Or flexible drawdown facilities and greater borrowing power on green homes through enhanced mortgage affordability? Is a margin discount a key identifier of green mortgages which is here to stay or is that the start of a longer journey of data capture and innovation? Connecting homeowners with this type of finance will be the work of a wide range of solutions, including some of the above-mentioned products as well as other solutions such as Property Linked Finance and a wider range of embedded secured and unsecured products. Amongst the backdrop of product specific debate, of which there is plenty, less discussed is how the broader topic of ‘green’ and sustainability impacts your business as a Directly Authorised firm. When it comes to the risks and opportunities of this segment of the market, where do you start? Regarding the opportunities, I have laid out many of those above, the bottom line is that of the £250bn investment required in housing Is your business ‘in the Green’? 08 SPRING MORTGAGE NEWSLETTER Rachael Hunnisett Associate Director for Built Environment Green Finance Institute
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