The future of green finance in the UK built environment sector

Connected Places Catapult in partnership with Vivid Economics, has released a report which explores the catalytic role that finance can play to support innovation and transformation towards sustainability in housing and the built environment more generally.

A public launch event took place on the 31st March 2021 during which the report authors, Vivid Economics, discussed the findings, along with two of the innovators who featured in the report’s case studies. The report is freely available to download at the link below. You can also watch the launch event again or read the blog below by Dan Rogers, a Solutions Architect at Connected Places Catapult.

The report, delivered in partnership with Vivid Economics, looks at the opportunities for innovative financing, the barriers that have limited its scale-up, and some measures to stimulate further investment and impact in this sector.

The 31st March online event brought together stakeholders with key roles in helping to realise the recommended areas of action in the report – with investors and financial institutions, central and local government, housing providers, innovators and suppliers to the built environment sector all in attendance. The session looked at promising innovations in financing, challenges that have held back innovations to date, and some of the interventions that could stimulate further investment in sustainability for the UK built environment sector.

Speaking about the report’s findings, Vivid Economics principal, Shally Venugopal, highlighted some of the leading innovative financing approaches, as well as their potential for financing innovations, such as low carbon heat and energy efficiency systems for residential buildings. Approaches such as energy / heat as a service, energy performance contracts, property-linked financing, and green mortgages were explored, looking at international examples of how they have been employed to drive investment in sustainability measures for the built environment.

CurveBlock, an SME that offers a platform for investment in zero carbon and energy positive property development, illustrated the possibilities of innovative financing. Co-founder Joey Jones spoke at the event to show how CurveBlock uses collective investment via its platform to purchase developments, and to build and sell the homes, with profits subsequently shared equally by CurveBlock and investors (with 5% going to the CurveBlock Helps charity).

Whilst the report and event highlighted the strong potential of innovative financing, it was also clear on some of the key challenges that need to be addressed to scale these further. For instance, property-linked financing has been applied successfully in Europe but could require significant resources and skills across UK local authorities to administer similar programmes. Meanwhile, green mortgages face the barriers of split incentives – landlords may not be willing to invest, as they will not see the financial benefits that result.

A panel session discussed some of these challenges to scaling up of financing innovations, and ways to address the barriers. The Catapult, Vivid Economics, and CurveBlock were joined on the panel by Ambue, an SME that helps people with energy efficiency upgrades to their homes, providing a critical perspective on some of the inhibitors to investment in residential properties.

“The panel discussion revealed the breadth of interest from all of the stakeholders in the value chain, but what is apparent is that better data is required to underpin all investments, from large institutions down to the individual homeowner deciding whether to install an Air Source Heat Pump. This data problem is the challenge we are addressing with Ambue.” – Hamish McMichael, Co-founder & CEO of Ambue.

The panel highlighted the potential for social housing providers to act as a forum to test and demonstrate the capability of innovative financing, learning what works and giving the confidence to scale the most successful approaches. Similarly, local authorities can offer prime spaces to test, using public and private finance to decarbonise heat networks and deploy nature-based solutions that also improve resident wellbeing.

The report identifies these and other potential interventions that could support the scale-up of innovative financing, and in turn, stimulate investment in sustainability for the UK built environment sector.

The Catapult concluded the session by calling for key stakeholders to join us in working collaboratively on some of these interventions – for instance, to work with local authorities, housing associations, and innovators to develop opportunities for piloting net zero placemaking approaches and investment. Our ambition is to address barriers limiting the progress of both innovative financing and the UK’s net zero transition, and help link those looking to work with innovators who can help them access the investment they need for built environment projects.

• If you would like to find out more about Innovative Financing in the Built Environment sector, please contact the Built Environment team at info@cp.catapult.org.uk.
• If you are an SME and would like to keep updated with business opportunities in this sector, you can join our network here.