At the same time, significant social and environmental gains are also there to be made.
Sustainable housing, Dutch style
As we have seen, the UK’s commercial buildings – giant though many are – represent a small proportion of the total. The bulk is housing and, according to recent figures, some 95 per cent of it needs retrofitting .
This means better insulation, like that available through the ECO+ scheme, plus heat pumps, solar panels and other technology.
Fund managers who enter the housing market tend to have to build new developments and they are mostly for rent. With next to no access to legacy housing, they do not have the opportunity to unleash their retrofitting strategies.
Do many owners or private landlords have the capital or incentive to retrofit their properties to the required standards?
Such expensive changes are coming at a time when wage growth (at around 6.1 per cent a year) lags inflation badly.
One idea is a Dutch scheme called Energiesprong – translated as ‘energy leap’ – which works with housing associations in the Netherlands and several other markets.
It borrows the approach taken by institutional fund managers by applying a whole-life model financing model.
This means up-front costs for retrofitting are met through energy savings and lower home maintenance liabilities over the long run.
The tenant then pays their association for energy usage, not utility providers, and the mark-up goes to pay for the retrofit.
All of a sudden, having better insulation, solar technology and an energy hub, such as a heat pumps, become more affordable.
The Energiesprong approach is now being trialled in Nottingham and Maldon, Essex. The scheme may cover just a handful of homes, but hopes are high.
Show me the money
Spreading the cost over the life of a property, lowering the cost of green energy in relative terms, and government subsidies (which we might reasonably expect to grow) are three ways to meet the retrofitting challenge.
However, as is so often the case, innovative thinkers in the financial services sector are coming up with more.
One you may already be familiar with is retrofitting mortgages.
Such products, like that provided by the Saffron Building Society, tie the rate you pay as a borrower to the energy efficiency rating of your house. There is an indirect incentive to use the money you save to upgrade.
There are some 52 such and similar products on the market. You would like to think more will come.
Perhaps we will eventually see some sort of link between energy efficiency and interest rates in every product, including the commercial mortgage financing used by fund managers.
