Around £190bn in existing loans eligible for green securitisation

Nearly £190bn in existing loans, equivalent to three million homes, could qualify for green residential mortgage-backed securities (RMBS) and could be key in making the UK housing stock more environmentally friendly.

According to research by geospatial technology company, Kamma, securitising just a quarter of the £190bn in existing loans could free up enough capital for the £48.3bn in in funding needed for properties across England and Wales to reached an energy performance certificate (EPC) band C.

This would be significant in helping lenders achieve an average EPC band of C across their mortgage portfolio by 2030 and could qualify a further 2.6 million homes for green securitisation.

The upgraded homes could also save around 13m tonnes in carbon dioxide emissions per year.

The company said challenges in qualifying properties as green has hindered the use of RMBS, along with a diminished reputation following the financial crash.

It said common barriers to scaling green RMBS was a lack of data or access to energy performance data.

However, improvements to geospatial data and information could allow external data such as household energy efficiency to be mapped against lender’s back books.

Accurate geocoding means 90 per cent of back books can be reconciled with external data, as opposed to 70 per cent previously, potentially allowing billions in additional loans for securitisation to be released.

The report also noted that increased government attention to the issue of climate change had meant a “regulatory inflection point” was being reached and increased consumer and investor demand could change the role and perception of securitisations.

Kamma’s chief executive, Orla Shields, said she believed the “time is now” for green RMBS, pointing to the increasing popularity of green investments, which nearly doubled to £288bn last year.

She said: “With a wave of new regulation about to hit the UK market, consumer sentiment and spending favouring green brands and an increase in ESG investment, banks are starting to wake up to the financial, as well as environmental, benefits of ESG products.

“Proposed regulations for the UK housing market, for example, could dramatically alter the value of energy inefficient homes. Greener investments are becoming the more profitable investments.”