UK Risks Losing Around $40 Billion in Sustainable Investment

The UK Sustainable Investment and Finance Association (UKSIF), which brings together 300+ members managing over $24.31 Trillion in global assets under management (AUM), said that the UK could potentially lose out on up to $39.66 billion of private investment.

UKSIF polled 100 business decision makers across the UK housing sector, representing $383.83 billion in turnover, on their views about the current opportunities and challenges of decarbonising the UK housing sector.

In its latest research findings where were released in London on Wednesday, UKSIF found that only 15% of the UK real estate companies place 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, and they include nearly three quarters (71%) of large UK real estate companies believe that introducing a long-term, CPI-linked rent ceiling for social housing, post-2025, would have a positive impact on companies investing in sustainable real estate in the UK.

Recognising the multiple participants involved in decarbonsing the UK housing stock, respondents said that if the government collaborated with lenders and brokers to better signpost green mortgage options, it would encourage over half (56%) of large UK real estate companies to increase investment in sustainable housing.

Over four in five (85%) of UK’s large real estate companies also said that they believe skills training hubs to reduce heat pump installation delays would have a positive impact on companies investing in sustainable housing in the UK.

Key Measures Identified

The UKSIF has identified key measures required to unlock the private capital needed to decarbonise the UK’s housing stock and they include set a requirement for private rented homes to achieve an EPC rating of C by 2035, widespread retrofitting including new skills hubs, and the rollout of heat pumps will help to significantly reduce the UK’s carbon emissions and save $10.24 billion in energy bills over the next decade and Increase green mortgage.

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 can help decarbonise the UK’s housing stock more efficiently, UKSIF said.

James Alexander, CEO at UKSIF said that successive governments’ wavering on decarbonising the UK’s housing stock has hampered private investment into one of the UK’s highest emitting sectors. “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,” he added.

UK residents can live in greener houses that are cheaper to heat as long as policymakers remain focused on the critical role of private investment in the transition. 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.

Chris Taylor, Head of Real Estate at Federated Hermes, said that it is critical to take immediate steps to unlock the private capital needed to decarbonise the UK’s housing stock and achieve the UK’s net zero ambitions. The scale and complexity of this challenge demands a tailored approach that considers the unique characteristics of the sector and supports the role of private investment in driving this transition.

Tim Lord, UK Head of Climate Change, HSBC UK, said that there was a need to unlock investment to retrofit almost all of the 28 million homes in the UK to cut emissions, increase comfort, and reduce running costs.

At the moment, the upfront costs of measures like replacing gas boilers with green alternatives, installing solar panels, and upgrading insulation can be challenging for households to meet. We need to create the right incentives for householders to invest, he noted.