UKSIF: three ways to keep green investors in the UK

Nearly two-thirds of decision makers in the British real estate sector may move investment out of the UK to other countries that support their sustainability goals better, according to a new report published by the UK Sustainable Investment and Finance Association (UKSIF). The UK housing sector risks losing out on £31 billion of private investments because of this.

“Our research shows that there is huge demand from real estate companies and investors alike to invest in the UK, but policy reform and government measures to close the skills gap are critical if the UK is to avoid falling behind other countries in the race for capital”, said James Alexander, CEO, UKSIF. 

Alexander blamed “successive governments’ wavering on decarbonising the UK’s housing stock” for hampering private investment into one of the UK’s highest emitting sectors.

“Investors are in desperate need of clarity from the government on sustainability policy, and only then can opportunities be unlocked for the UK housing sector, with benefits realised for consumers, the environment and the wider economy,” he said.

UKSIF polled 100 business decision makers across the UK housing sector representing £300 billion in turnover for the Financing the Future: Housing Report. They were asked for their views about the current opportunities and challenges of decarbonising the UK housing sector.

The research found that only 15% of UK real estate companies rate the UK as the top market for sustainable investments, with 63% of respondents planning to move investments out of the UK to a market that is more supportive of their sustainability goals.

However, improvements in the sustainability policy landscape could see the UK housing sector benefit, with almost all large UK real estate companies considering an increase in investment if this was the case.

The respondents identified various factors which could support this further investment drive. Taking their suggestions on board, UKSIF has identified three key measures required to unlock the private capital needed to decarbonise the UK’s housing stock.

The first is setting a requirement for private rented homes to achieve an EPC rating of C by 2035. This would involve widespread retrofitting including new skills hubs and the rollout of heat pumps and would help significantly reduce the UK’s carbon emissions while saving £8 billion in energy bills over the next decade.

The second is an increase in green mortgage take-up. The Financial Conduct Authority should adopt a clear definition of green mortgages to better align market products, the report says. This could include developing a lenders’ charter for green mortgage providers or encouraging lenders to offer their green mortgages to any home that has an EPC rating of C and above.

The third recommendation is secure longer-term rent settlements for social housing providers to support them to retrofit and decarbonise. As funding remains the biggest barrier for social housing providers to retrofit their housing stock, introducing Capital Allowances for private investors to invest in the sector could help decarbonise the UK’s housing stock more efficiently.

“UKSIF has developed a set of recommendations that we think could accelerate the much-needed decarbonisation of the UK’s housing stock,” said Shamez Alibhai, head of community housing, Man Group. “Its cost-effective proposals are broad-based with clear economic benefits to families, investors and the planet. We want to build a housing market that works for everyone, and this research underlines the significant potential for sustainable economic growth delivered through comprehensive housing policy.”