We argue that specialist development finance lenders must join in the sector-wide plan for meeting climate, nature and the wider environmental goals and helping build sustainable, eco homes.
Earlier this year, the UK’s major housebuilders committed to the net zero roadmap, developed under the Future Homes Task Force, which comprise leading figures from the relevant homebuilding, supply chain, skills, environmental, planning, academic, infrastructure, utilities and regulator communities, and through collaboration with the government.
Chiefly, its aims are to deliver high-quality homes that are zero-carbon ready, sustainable, while being healthy, safe and comfortable from 2025. Furthermore, it looks to deliver places and developments that are consistently low carbon, nature-rich, resilient, well designed and beautiful by 2025; production and construction methods that are net zero and sustainable by 2050 (with ample and visible progress by 2025 and 2030); and business operations in line with the ‘race to zero’ (net zero by 2050 with a 50% reduction by 2030).
- Property investors face 'huge risk' of stranded assets if they fail to decarbonise
- How can the UK solve the housing crisis and see prices stabilise?
- Why funding sustainable development offers lenders brand protection
However, as the UK charts its path toward net zero, we are yet to see a similar commitment coming from the housing development finance industry as a whole. Our lending manager, Barney Iles, explains that “there are currently no publicly recognised frameworks, best-practice guides or ESG checklists for the construction industry.” There are, however, a whole range of ways in which development finance lenders can assess the ESG credentials of the housing schemes they seek to fund.
Net zero housing infrastructure needs to be delivered at scale, pace and at the lowest cost to maximize the benefits and to keep the costs to prospective homeowners and taxpayers down. “Harnessing sources of funding which is ready to invest from non-bank and specialist lenders will avoid further burdens on government finances — especially during a time when there are existing pressures on government finances. Ultimately, it is key for specialist non-bank lenders to work hand-in-hand with the government in delivering such housing targets,” explained Barney.
At Blend Network, we are actively funding green, sustainable and ESG-compliant housing schemes across the UK regions. However, we are planning to further formalise our commitment to sustainable living and a net zero economy by launching our new sustainable development finance initiative, for which we will announce more details in the first quarter of 2022.
From our borrowers’ perspective, environmental performance and ESG credentials can help property developers improve sales or attract better tenants who are increasingly seeking efficient, healthy, and green-certified buildings to live and work in. Overall, incorporating ESG factors can lead to increased profitability through higher property values, attracting more/better tenants and improved returns on investment.
In our view, aside from making decisions that are socially responsible or morally right, the growing trend of ESG integration across companies and investors makes the need to address sustainability and societal issues within the construction industry increasingly important. This is why our sustainable development finance initiative will require community benefits, sustainability and social initiatives to be delivered as part of the housing schemes that we fund. “We aim to implement best practice in sustainable development finance lending across the UK regions to accelerate investment,” added Barney.
In summary, as the UK gears up to meet the climate goals, it is vital and urgent that we align policy and real estate development finance to offer the sustainable housing and infrastructure backbone to a net zero economy.