The high costs involved are a major deterrent for property owners and investors, particularly as many want to see clearer regulations around net zero buildings and worry about uncertain payback periods on their expenditure. What’s more, buildings upgrades may impose a loss of rental income, as they can be tricky to carry out with tenants in place.
That said, in addition to providing access to funding for the development of new green buildings, lenders are becoming more focused on provision of financing to support the retrofitting of existing properties to improve energy efficiency across the built environment. A growing number of banks are providing green loans to support energy-efficiency projects.15 In 2019, a group of UK banks, including HSBC, made a five-year GBP450 million revolving credit facility available to Derwent London, one of the largest British real estate investment trusts, which includes a GBP300m tranche specifically available to fund expenditure on green projects.16
What’s more, HSBC, along with other banks, has called on the UK government to implement policies that will support the financing and roll out of energy-efficiency retrofits in homes to reduce energy bills, support green jobs and deliver on the UK’s net zero targets.17