Banking for net-zero homes
It seems that after decades of studies followed by numerous warnings, the UK has finally awoken to the threat of climate change.
Aside from the legal commitments made to hit net-zero targets by 2050, we heard this week that no VAT will be charged on energy saving home improvements. This includes things like insulation, solar panels, and heat pumps (ground or air).
Targeting homes is key to hitting net-zero commitments as real estate accounts for almost 20-36% of all greenhouse gas emissions. Homes also account for up to 40% of energy consumed, according to a recent report from Plentific.
Households are not short of options or suppliers. The main challenge is the cost of retrofitting existing homes to be more energy efficient. Estimates vary greatly, but the lowest average estimate per household I’ve seen is £10,000. So, what does this all mean for banks?
As the saying goes, “Where there is pain, there is opportunity,” and while banks have strong corporate statements on ESG and net-zero, many have been slow to take advantage of the opportunities being presented. I can see at least three big opportunities that most banks could be targeting:
- Carbon calculators
Fintechs like ecolytiq leverage open banking to analyse customer spend and identify the carbon footprint from their transactions. Not only this, but they are able to help customers identify alternative spending options that would have had less of a carbon footprint.
As customer awareness increases, so too will the need for guidance towards more carbon-efficient spending. For banks, this is not only an opportunity to provide a valuable service, they could also potentially generate a new revenue stream by taking referral fees from organisations providing products/services with low carbon footprints. Such a service could also increase customer engagement with the bank.
- Home improvement loans
As highlighted above, the cost of making home improvements can be significant. However, the savings made from these improvements can be just as significant. With the cost of living and inflation on the rise, many households will be looking for savings wherever we can.
Again, there is opportunity to help homeowners understand the possible savings from such improvements and then to provide loans to spread out the cost of retrofitting energy saving upgrades. The recent removal of VAT on energy saving retrofits will increase the justification by reducing costs by 20%.
For households that have already invested in making their homes more energy efficient, banks have an opportunity to help manage their savings via investments that provide greater returns than deposit accounts. In addition to this, some banks are also already moving towards funds that invest in companies that are more energy efficient or are supplying energy efficient products/services.
As I’ve mentioned before, Triodos Bank is the epitome of a bank that is focused on serving customers through saving the planet. While I can’t see all banks being so altruistic, hopefully by seeing the opportunities on offer, a good balance between helping the planet and making profit can be achieved.
I’m just saying that there is a real win-win-win situation here. Banks can make a significant difference to the planet, to their customers, and ultimately to their bottom line.
About the author
Dharmesh Mistry has been in banking for 30 years and has been at the forefront of banking technology and innovation. From the very first internet and mobile banking apps to artificial intelligence (AI) and virtual reality (VR).
He has been on both sides of the fence and he’s not afraid to share his opinions.
He is CEO of AskHomey, which focuses on the experience for households, and an investor and mentor in proptech and fintech.
Follow Dharmesh on Twitter @dharmeshmistry and LinkedIn.
Read all his “I’m just saying” musings here.