APPG Meeting on Financing the Decarbonisation of Homes


The APPG on Sustainable Finance held a virtual roundtable discussion to explore financing the decarbonisation of homes. The session was chaired by Ed Davey MP, Chair of the APPG on Sustainable Finance, who opened up the discussion by speaking about the political difficulties of decarbonising heat as it involves all buildings in the country and altering people’s homes. He suggested that we will need to take an eclectic approach to decarbonising heat using both hydrogen, greening electricity and heat pumps. Regulations have a key role in driving market adaptation and innovation.

The Leader of Solihull Council, Cllr Ian Courts spoke about the importance of having a supply line of funding to deliver skill development. He suggested that the Government should create a 5-year plan of how to reskill enough workers to retrofit homes. He argued that government funded schemes for local authorities to decarbonise homes would be much better than individual grants to homeowners as it can be overwhelming and complicated for individuals to be confident about how to decarbonise their homes. He also spoke about how low-carbon neighbourhoods can be used to develop prototypes of net zero delivery on the ground and the need for energy planning devolution. This is something which UK100 has called for in our Power Shift report.

Rufus Grantham from Bankers without Boundaries fully agreed with Cllr Courts on the need to deliver at scale rather than the Government lending to individuals, as this doesn’t isn’t suited to the third of homeowners who are over 65 or the third of householders who live in either social housing or private rental. Bankers without Boundaries has proposed a local government delivered scaled neighbourhood retrofit programme.

David Cowdrey gave an account on blue hydrogen. He outlined that blue hydrogen is 20% higher carbon footprint than gas or coal and will be 3 to 5 times more expensive than natural gas. At the moment hydrogen production is grey due to the lack of carbon capture and storage deployed at present. David argued that only green hydrogen should be considered and that this could be very useful for the hard to decarbonise sectors like shipping, aviation, heavy industry and heavy transport. He also reminded participants that when you burn hydrogen in the home, it will also generate NOx. To use a rare and expensive element, which has less energy per unit than gas and costs three to fives times more than gas, does not make financial sense. CCS currently has poor capture rates – Gorgon in Australia claimed 80% capture but achieved just 30% rates.

Polly Billington, Chief Executive of UK100, spoke about there being no returns for decarbonising homes to local authorities. This means that councils are dependent on the Government. We must think of ways that we can create returns on investments so that it becomes attractive to the private sector to decarbonise. This is about shaping and creating markets to drive decarbonisation and reducing the costs of low-carbon technologies rather than red tape. The heating solutions will vary across the UK and across different kinds of homes.

Following on from this, Charles Abel-Smith talked about the strong convening powers that local authorities have to bring together different housing providers and owners to decarbonise housing. He spoke about the roundtables which UK100 ran in relation to the development of the UK Infrastructure Bank. UK100 believes that the NIB has the potential to be a key enabler of Net Zero, provided it is designed in the right way. To be most effective, the NIB’s Net Zero mandate must be place based, have an advisory capacity and provide development capital. There are three areas that councils are looking for national support from: development of new innovative financing solutions, project development support, and ensuring that all government regulation is aligned to maximise investment in the net zero transition. Bristol, Nottingham and Leeds have identified project pipelines which could be developed with appropriate support in relation to decarbonising homes. Charles argued that the UKIB should work to help to develop these sorts of project pipelines and to replicate successful approaches across the UK.

Emma Harvey, Director at the Green Finance Institute, added that private finance is critical in decarbonising the built environment. She argued  that to attract private finance you need the correct enabling environment, especially the correct data and policy landscape. By bringing together sectors from finance, academia, civil society, public sector, it is possible to identify and  overcome the barriers to the decarbonisation of homes. Emma outlined some of the key financial solutions:

  • Green mortgages could be launched by banks to provide a financial incentive to retrofit your home or buy an energy efficient home.
  • Property linked finance has been highly effective in the US and means that mortgages are linked to the property rather than the individual so that if people move houses the cost of retrofitting homes isn’t paid by the ex-home owner.
  • Local climate bonds.
  • GFI support the Green Building Council’s recommendation of introducing an energy adjusted stamp duty land tax.

Ed Davey posed the question – how can we balance the need to build as many affordable social homes as possible with the need to build low-carbon homes?


In response to the point about sustainable homes potentially being more expensive, Polly added that some UK100 members such as Norwich Council have made the decision to set higher standards, which they win awards for and then can then scale up their approach. The key thing is scale and the issue of having to retrofit the homes within years unless the standards are there from the start. By understanding the cost of that, it can help focus the minds of directors of finance and housing.

David Cowdrey raised the point that a government loan scheme akin to student loans could be set up for decarbonising homes. Each home being decarbonised would be cheaper than each student loan and it would also remove VAT on retrofitting homes. David added that carbon capture is not well developed globally and even the most modern technologies in CCS don’t remove the majority of carbon from the atmosphere, so reducing emissions at source is critical.

Polly argued that a program of individual loans to homeowners wouldn’t work as a local authority driven approach is needed at scale to reduce the costs. She added that all home finance provided should be green so that all loans for homes are tied to decarbonising homes. Heather McKay said that the UKIB must learn from local authorities, as they are better placed than other stakeholders to understand the social implications of green investment, and how levelling up and net zero interplay on the ground.

Nick suggested that retrofitting homes cannot be left up to individuals as grants are needed to cover the whole costs and we need a mass reskilling of workers in decarbonising homes. Emma added the proposal of energy adjusted stamp duty land tax, whereby people would pay less stamp duty if they buy a more energy efficient house, pay more if they buy a less efficient one and get a rebate if they improve the energy efficiency of their homes. But a multitude of different solutions would be needed for different housing contexts.

The discussion then focused on how to encourage people to engage in home improvements to decarbonise homes. The panel agreed on the need for good communications about home improvements to residents and also to incentivise individuals to do this more strongly. Rufus Grantham argued that comfort and healthcare were more important than environmental aspects when speaking to people about the benefits of decarbonising homes.

The main recommendations from each speaker:

Emma Harvey – For the Government to consult and work with the finance sector on all regulation and policy developments.

Charles Abel-Smith – For the UK Investment Bank to provide intelligent finance which collaborates with private finance.

Polly Billington – Tumbling costs of low-carbon technologies don’t happen by magic so we need government investment and subsidies to shape and support these markets to drive down costs through development capital.

Cllr Ian Courts – We need to develop the supply chain. A stability of funding to local authorities will enable the reskilling of workers and integrate climate considerations into the planning and policy agendas within government.

Ed Davey MP – We need to de-risk investments in decarbonising energy. This must be applied to decarbonising homes and will require a long-term approach and the correct regulatory framework.