Investment Taskforce examines barriers to housing retrofit

Investment Taskforce examines barriers to housing retrofit

3Ci’s Net Zero Investment Taskforce, comprising finance industry leaders, launched a new report at the House of Lords examining the barriers to housing retrofit, which highlights support for large-scale private sector investment in Net Zero Neighbourhoods.

The initial findings and recommendations of the Cities Commission for Climate Investment’s Net Zero Investment Taskforce have been published in the new report, titled ‘From Challenge to Opportunity: Unlocking a UK-wide Net Zero Investment Dividend’.

The Taskforce, comprising a diverse array of stakeholders from banking, insurance, pensions, venture capital, and ESG investment sectors, was convened to examine 3Ci’s innovative financing model for Net Zero Neighbourhoods, with a primary focus on unlocking funding for housing retrofit initiatives.

The Net Zero Neighbourhoods concept takes a multi asset approach to neighbourhood decarbonisation operating across domestic and commercial property retrofit; renewable energy; transport; and waste. The model uses a share of returns from high-yield assets, like energy, to pump-prime low-performing ones, like retrofit and waste, potentially captured in a single financial vehicle. The model aims to reduce the need for the scale of public subsidy required for retrofit whilst delivering interventions at no additional upfront cost to the homeowner or tenant — a potential game-changer.

The Taskforce highlighted that strategic public investment can leverage private finance. They suggest further consideration should be given to integrating existing and future public investment with private finance, including grant funding. From an investor perspective, major patient investors like pension and insurance companies, whose capital is in some ways most suited to retrofit, are attracted to very large-scale projects, the likes of which most current schemes cannot achieve. Creating scale across multiple programmes and geographies could unlock this capital.

The much sought-after solution to retrofit financing of crowding-in higher levels of private investment could therefore be realised through the ‘Net Zero Neighbourhoods’ model.

Investors agreed that local authorities must play a central role in Net Zero Neighbourhoods by linking to area regeneration plans and services, supporting local jobs and economic growth.

Catherine McGuinness CBE, Chair of the 3Ci Net Zero Investment Taskforce and Non-Executive Director at Connected Places Catapult, said: “Our findings reaffirm that decarbonising neighbourhoods at scale is not straightforward. Whilst our aim may be to retrofit homes, we are also trying to retrofit a financial system and its models to a purpose for which they were not created. A rapid evolution is required, creating an investment ecosystem that will help the market to adapt and new models to emerge.”

Prof Greg Clark CBE, Chair of 3Ci and Connected Places Catapult commented: “3Ci has a vital mission to enable the urban investment required in delivering the UK’s ambitious net zero commitment, city by city, and neighbourhood by neighbourhood. I am grateful to Catherine and the members of this taskforce for taking such a diligent view of the current opportunities and challenges to invest in retrofit at scale, and how we can address them.”

The Taskforce’s recommendations include the following:

  • Activate Retrofit Demonstrators as a top priority: a series of demonstrators are needed to address the challenges highlighted by this Taskforce, considering how they can also enable a Just Transition through financing models and identify the key project elements/players that need to be on board.
  • Convene a UK-wide conversation, starting with a Net Zero Investment Summit: with a commitment to a structured 2–3-year dialogue, steered by a collective of place leadership, investors and politicians from the Devolved Administrations as well as the UK Government, alongside the many agencies delivering excellent work in this space to cohere findings and efforts.
  • A stronger enabling environment should be built for net zero investment, including further clarity of national intent for local net zero policy to establish market confidence.  For example, delivery cannot happen without a stronger supply chain, which relies on such confidence.

Taskforce members:

  • Association of British Insurers
  • Investment Delivery Forum
  • City of London Corporation
  • Barclays
  • Big Society Capital
  • Building Societies Association
  • British Property Federation
  • British Private Equity & Venture Capital Association (BVCA)
  • HSBC
  • Impact Investing Institute
  • Institute of Chartered Accountants in England and Wales (ICAEW)
  • Legal & General (L&G)
  • Local Government Association (LGA)
  • Lloyds Banking Group
  • NatWest
  • Scottish National Investment Bank (SNIB)
  • United Kingdom Infrastructure Bank (UKIB)
  • UK Finance

Related posts