3 million UK homes could be eligible for Green Mortgages worth £190 bn

By Joy Dumasia

The geospatial technology company Kamma states securitising homes that have achieved an EPC grade A and B could offer a recapitalisation opportunity to £190 billion.

Existing mortgage loans on EPC grade A and B properties have been analysed in a report by Kamma. They estimate 3 million homes and £190 billion in existing loans could qualify for green securitisation. Challenges with modifying properties as green have prevented RMBS from enjoying the dramatic growth seen in ESG investment globally, which increased by 96% in the last year to £288 billion.

Previous government proposals result in a £48.3bn funding gap for the private sector to fill, with mortgage lenders asked to deliver an average EPC grade C by 2030. Green securitisations provide the vehicle to fund this, saving 13 million tonnes in annual CO2 emissions in the process.

Government targets for improving UK property suffer from a significant gap in funding. Yet, green securitisations could more than cover this gap, unleashing a green funding revolution in the UK marketplace.

The UK government, hosts of COP26 later this year in Glasgow, have set the most ambitious climate targets in the world: to reduce emissions by 78% by 2035. UK property contributes 22% of total emissions, yet the end of the Green Homes Grant scheme leaves no clear solution or roadmap for improving household energy efficiency and reducing emissions. Government proposals so far have pointed to an increased role for the private sector, with mortgage lenders set to take increased responsibility for delivering an average EPC grade C by 2030.

Kamma CEO Orla Shields said: “Hosting the UN’s Climate Change Summit is putting yet more pressure on the UK government to lead the way in their commitment to fighting climate change. So far, they’ve only set targets and laid out the scale of the challenge. In the search for solutions, we believe the time is now for green RMBS.”

Recently, IBS Intelligence reported that GreenArc Capital, in partnership with BNP Paribas, has been awarded the Financial Sector Technology Innovation Proof of Concept (POC) Grant. The POC grant is part of the Financial Sector Technology, and Innovation (FSTI) scheme under the Financial Sector Development Fund administered by the Monetary Authority of Singapore (MAS) and is provided as funding support for experimentation, development, and dissemination nascent innovative technologies in the financial services sector.