Scotland’s home efficiency market ‘could attract £37bn in private investment’

According to the Climate Change Committee (CCC), decarbonising Scotland’s buildings will require an additional £30bn of investment, exceeding what the Scottish Government alone can fund. With buildings accounting for 13% of Scotland’s total carbon emissions and 30% of total energy consumption, mobilising private capital to tackle home energy efficiency is critical to achieving net zero by Scotland’s target of 2045.

The research, conducted by insight and communications consultancy SEC Newgate, examined Scottish consumer appetite for green home finance products, including green mortgages, unsecured green home loans, Property Linked Finance (PLF) and Green Rental Agreements (GRAs), in the scenario where there were proposed mandated minimum energy efficiency standards for all owner-occupier and non-domestic properties in Scotland.

Titled ‘Scottish consumer attitudes towards green home finance products’, it revealed strong demand among both residents and landlords to improve energy efficiency, supported by financial solutions, once consumers were made aware and educated on green home improvements and green home financial solutions.

Support for the Scottish Government’s proposed net zero goals was strong across the Scottish public polled with 63% of residents (homeowners and renters) and 76% of landlords supporting the plans. The research found educating consumers on green home improvements and financial solutions to support energy efficiency and decarbonisation correlated strongly with support for the government’s net zero goals, with 65% of residents and 79% of landlords feeling positive about green home finance products if there were mandated minimum energy efficiency standards for all homes.

Yet, despite this opportunity, low awareness of green loans, mortgages and other financing options remains a barrier to uptake. As a result, only 4.7% of the estimated £37bn market potential is likely to consider taking out a product. Awareness raising combined with policy and regulatory clarity for consumers around future requirements could unlock a market of c.£37bn, in a market currently worth less than £2bn in Scotland.

A leading example is Capital Credit Union in Scotland, which now offers loans aligned with the Green Home Finance Principles (GHFP) to help households access green home technologies. Their alignment means around 65% of Scottish households and just under half of all postcode districts have access to a GHFP-aligned community-offered green loans. Capital Credit Union has mobilised over £3 million in green home loans in just over 12 months and expects to reach £5m before the end of the year.

The research strongly supports the case for the Scottish Government to leverage the positive sentiment on proposed net zero plans with the financial solution appeal.

To continue developing the green home finance market in Scotland, the GFI recommends the Scottish government introduces policy actions in line with the originally proposed Heat in Buildings Bill, to introduce targets for all properties whilst ensuring these are introduced in a measured and appropriate way to avoid exacerbating fuel poverty and rally the finance industry to introduce and scale financial solutions while accelerating market education, skills and supply chains to help realise Scotland’s c.£37bn home efficiency opportunity.

To drive progress on building decarbonisation, the GFI and the Scottish Government launched the Scotland Green Home Finance Certificate to support mortgage brokers, hosted the inaugural Scotland Green Home Finance Summit and developed the Scottish PLF Greenprint – published today - outlining how PLF could be introduced, executed and scaled in Scotland.

The Greenprint highlights the substantial potential of the Scottish PLF market, estimating its commercial and residential value at £8.7bn to £15bn.

Cabinet secretary for housing Mairi McAllan said: “It’s absolutely essential that we decarbonise our homes to achieve our twin aims of delivering affordable heat and reducing fuel poverty whilst also cutting carbon emissions. New green home finance products will have a big part to play in helping us to deliver this.

“I am therefore very encouraged that this research shows there is strong interest in Scotland - among both residents and landlords - to improve energy efficiency once they are aware of the financial solutions that are available. We have considered this carefully along with the recommendations of the Green Heat Finance Taskforce and will respond shortly.”

Rhian-Mari Thomas, CEO of GFI, said: “This research shows there is support and appetite amongst the Scottish public for green home improvements. The GFI is working with the Scottish Government, financial institutions, and industry to introduce policy measures and provide the financial solutions that have the potential to catalyse c.£37bn of private investment needed to unlock the interest evident in this analysis.”

Samantha Homer, CEO of Capital Credit Union, said: “At Capital Credit Union, we believe ethical finance has a vital role to play in helping Scotland achieve its net zero ambitions. Our green loans give members an affordable and transparent way to make their homes warmer and more energy-efficient, with the flexibility to repay part of their loan when they receive a government grant.

“We are also careful to work only with reputable suppliers to ensure members receive quality installations and genuine value for money. This practical and fair approach supports households across Scotland while contributing to the aims of the Heat in Buildings Strategy and the country’s wider carbon-reduction goals, aligned with the Green Home Finance Principles.”