The Intermediary – March 2025 - Flipbook - Page 79
T E C H N O L O GY
Opinion
Data modelling
and net zero
T
he fight to slow climate
change and hit net
zero by 2050 has been
gathering steam for
more than five years
now, but real progress
has been slower than many might
want. Target deadlines were pushed
back, and pushed back again, under
previous Conservative Governments,
struggling to keep favour with their
core voters and knowing a General
Election was looming.
With a new Labour Government
now in office, many of those rollbacks
have been, or are in the process of
being reversed. In the residential
property sector, there has been a flurry
of activity over the past six months.
Big commitments
The Government has commied to
upgrading five million homes by
the end of this Parliament, and to
reduce fuel poverty by ensuring as
many fuel-poor homes in England
as is reasonably practical achieve a
minimum energy rating of Band C
by the end of 2030, partly through its
Warm Homes Plan.
A significant element of this is set to
come from the private rented sector,
where landlords will be required to
ensure that their properties achieve
at least an Energy Performance
Certificate (EPC) rating of C by 2030.
This poses challenges and
opportunities for landlords, but the
implication for lenders is very real,
adding another layer to the need
to collect as much data on climaterelated risk and energy efficiency.
Lenders are already on the hook to
publicly disclose their exposure to
climate-related risk under the Task
Force on Climate-related Financial
Disclosures regime.
This is further backed up by recent
changes at the Bank of England. In
its own disclosures published last
summer, the bank outlined several
steps to mitigate climate-related
financial risks to residential mortgage
collateral posted in the Sterling
Monetary Framework.
As part of these operations, the
bank lends to eligible firms against
collateral, including residential
mortgages, which represent the
majority of collateral posted
with the bank.
In 2023, it started collecting EPC
ratings for residential mortgage
collateral on a mandatory basis, and
in early summer 2024 said it would
no longer accept buy-to-let (BTL)
mortgages in England and Wales
with an EPC rating of less than E as
collateral unless the counterparty can
confirm that there is a valid exemption
in place. All of this requires data.
More of it, beer quality and collected
more frequently.
EPC-centric
Currently, regulation and policy rely
on EPC ratings, and this will step
up a gear with the higher Minimum
Energy Efficiency Standards. Cue
more change. In December, the
Government opened a consultation
proposing sweeping reform of the
energy performance of buildings
regulations. Plans include introducing
more complex metrics for EPCs and
stricter oversight of EPC quality, along
with a review of how long they remain
valid. Planned consumer research
must be central to final decisionmaking, and we’re questioning why
the Government measures validity of
the EPC in terms of years – shouldn’t
it be valid when put to use, whether
that is to claim grant funding or meet
minimum standards?
Also of interest is the need for
short-term lets and heritage homes to
get EPCs. New tech may not suit every
home, but every home needs a plan as
we face increased insecurity both in
energy and climate.
This extension will close gaps in
consumer awareness and the national
dataset, and we will be working with
MARK BLACKWELL
is COO of CoreLogic
Government to determine how to
tailor advice for those older homes –
not least because our Ecofurb service
is a pioneer in tailoring advice and
delivering sympathetic retrofits.
Whatever the final rules are, it’s
anticipated that changes to the EPC
metrics will be introduced in the
second half of 2026.
While all of this will inevitably
accelerate the drive to decarbonise
British homes, improve energy
efficiency and bring down the cost
of heating for all households, it isn’t
going to provide lenders with the
tools they need to manage their own
risk exposure.
Even with improved EPC metrics,
there is still considerable climaterelated risk that won’t be captured.
And even with more regular EPC
inspections, there will be properties
on lender back books with inaccurate
valuations because climate risk and
energy efficiency standards are so
out of date.
This risk presents a material
difference to the value of residential
mortgage assets – one that is
increasing with every degree average
temperatures rise and millimetre sea
levels go up. The data is available, and
it doesn’t rely wholly on EPCs.
Following our acquisition of
Parity Projects last year, we are now
working with several mortgage
lenders to run analysis of addresslevel data to identify, assess and model
properties that should be targeted for
retrofit measures.
Policy and politics are about to go
full steam ahead for net zero, but it can
only go so far. We in the private sector
also have a vital role to play. ●
March 2025 | The Intermediary
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