Lenders must chip in to Net Zero

Last month, we wrote a piece in Specialist Finance Introducer Magazine titled ‘Lenders must chip in to Net Zero’. If you missed it, you can read it on page 65 of the magazine in this link or below.

The country’s leading home builders have committed to a delivery plan to meet the Government’s climate and emissions targets[i]. Roxana Mohammadian-Molina, Chief Strategy Officer at specialist development finance lender Blend Network, argues that specialist development finance lenders must join in the sector-wide plan for meeting climate, nature and the wider environmental targets in helping build sustainable homes.

Earlier this year, the UK’s major housebuilders committed to the net zero roadmap through the Future Homes Task Force, which comprises leading figures from the relevant home building, supply chain, skills, environmental, planning, academic, infrastructure, utilities and regulator communities, and through collaboration with the Government. Chiefly, the plan’s goals are to deliver high-quality homes that are zero carbon ready, sustainable, while being healthy, safe and comfortable from 2025. Furthermore, the plan aims to deliver places and developments that are consistently low carbon, nature-rich, resilient, healthy, 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 also businesses operations in line with the race to zero: net zero by 2050 with a 50% reduction by 2030[ii].

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. There are currently no publicly recognized 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 benefit of net zero 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 at a time when there are already 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.

At Blend Network, we are already actively funding green, sustainable and ESG-compliant housing schemes across the UK regions. However, we are planning to further formalize our commitment to sustainable living and a net zero economy by launching our Green Is Good initiative, for which we will announce more details in due course, in the first quarter of 2022. From our borrower’s 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. All in all, incorporating ESG factors can lead to increased profitability through higher property values, attracting more/better tenants and improved returns on investment. From our perspective, 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 Green Is Good initiative will require community benefits, sustainability and social initiatives (CSS) 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.

In summary, as the UK gears up to meet the government’s target of reaching net-zero carbon emissions by 2050, 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.

BLEND Loan Network Limited is authorised and regulated by the Financial Conduct Authority (Reg No: 913456).

[i] Source: https://bit.ly/3GiXOgm

[ii] Source: https://bit.ly/3CiG5TZ

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