Data partnerships can help lenders achieve ESG objectives
With it’s ‘net zero target’, the government has committed to ensuring that the UK reduces greenhouse gas emissions to such an extent by 2050 that the amount of greenhouse gas emissions produced by the country will be equal to or less than the emissions removed from the environment.
Households are a big emitter of greenhouse gases, accounting for 26% of total emissions in the UK, on a residency basis. So, as 2050 draws closer, it’s unsurprising that there is increasing momentum in the efforts to make the country’s housing stock more energy efficient.
Over recent months, an increasing number of ‘green mortgages’ have hit the market as lenders try to do their bit to encourage homeowners to invest in improving the energy efficiency of their property.
One notable recent example is the 0% green additional borrowing product, launched by Nationwide. It will enable up to 5,000 households with a Nationwide mortgage to borrow £5,000-£15,000 to fund non-structural, energy-efficient home improvements, such as solar panels, air source heat pump, window upgrades, boiler upgrades, cavity wall insulation, loft insulation or an electric car charging point.
There are many other products, launched in the last year, that offer an incentive such as cashback or rate reduction, to encourage green home improvements. The standard way of measuring the energy efficiency of a home and, therefore whether improvements have successfully improved this, is with an Energy Performance Certificate (EPC) which is produced following an inspection by a surveyor.
However, until recently, the problem for lenders has been that in order to find out the most up-to-date EPC on a property they have needed to engage in a laborious manual process. This is because the only available EPC data feeds have been updated quarterly, providing information that is potentially three months out of date. This has proven troublesome for lenders and has been a major stumbling block in the development of more green focused products.
This has thankfully now changed thanks to Live EPC, a real-time EPC integration that we have recently launched at CLSQ. Unlike previous offerings, Live EPC offers real-time access to EPC data directly from the official register. This means, as soon as an EPC assessor submits a new EPC certificate for a property, the data is uploaded and lenders have access to real-time information that can be used for immediate impact assessment of green lending initiatives, new lending decisions and back book analysis.
This is an important step in encouraging the development of more mortgage propositions that encourage energy efficient renovations and it’s a good example of how intelligent data integrations can not only help lenders to be more efficient, but also better equipped to meet their ESG objectives.
This is one of the reasons that CLSQ and D-Risk have been named once again as climate partners for Shawbrook Bank, which used the data and insights we provided to complete its quantitative assessment of climate related scenarios, using the information for its latest Task Force on Climate-related Financial Disclosures (TCFD) Report.
We believe that, by building close partnerships with the lending community, we will help to play a key role in preparing homeowners to prepare their properties to be carbon neutral ahead of 2050.
Lorenzo Tejada-Orrell, Chief Innovation Officer at CLSQ
