Heat in Buildings: progress report 2023
Annual update on progress against our Heat in Buildings Strategy.
Finance
Green Heat Finance Taskforce
The independent Green Heat Finance Taskforce continues work to explore innovative solutions to deliver the necessary private sector finance at scale for the heat transition.
The market for green finance is still relatively immature, reflecting the current uncertainty over future longer-term demand and lack of existing performance data in this area. There is, however, movement, inspired by increased individual environmental awareness and business decisions to meet their own Environmental Social Governance (ESG) principles around sustainability of their activities.
Green mortgages, or additional secured loans, have been around for a few years, with lenders increasingly interested in the growth potential in this space. Many lenders are starting to test and pilot additional green borrowing products, with low or even zero interest for existing customers and repayment spread over longer periods of time.
There is also market interest in developing other financial products like property linked finance, where the financing is tied to the building and not an individual, and equity release products which allow people who own their property to release cash for green retrofit by selling a stake in their property. While there is potential in these schemes, they are less developed than secured lending, with very few, if any, specific products available on the market currently. However, the Green Heat Finance Taskforce is considering the state of the existing market and how to unlock opportunities to grow a range of private sector products to meet the different needs of individual property owners.
The Taskforce has met three times so far this financial year, and is working towards publishing its Part 1 Report shortly, followed by a Part 2 Report in early 2024. These reports will provide a range of recommendations that the Scottish Government, working in collaboration with the private sector and others, could bring forward to unlock the scaled growth in private capital for decarbonising heat.
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