A recent survey of more than 1,000 building professionals revealed that nearly half (46%) of them expect to build commercial buildings with high environmental standards in the next three years.
Building to green standards is on the rise, with energy-efficient and sustainable homes also becoming increasingly popular. But what happens when you need to borrow money to buy a property? Keep reading for our guide to green and ethical mortgages.
Barclays launches the UK's first green mortgage
Earlier this month, Barclays became the first lender in the UK to offer a 'green mortgage', offering preferential rates if you're buying an energy-efficient home.
The green mortgage is available on properties that have an A or B Energy Performance Certificate (EPC) rating and there are two- and five-year fixed-rate options to a maximum of 90% loan-to-value.
Rhian-Mari Thomas, managing director and chairman of Barclays Green Banking Council, says: “This will be an increasingly important part of the mortgage market. Decarbonising UK housing stock is critical and forms a key part of the UK government’s clean growth strategy. Increasingly our clients want to say ‘we are getting on board with a low carbon future’.”
Barclays will initially partner with Barratt Homes, Berkeley Group, Countryside Properties, Crest Nicholson and Redrow Homes, with a view to adding all major housebuilders by the end of 2018.
A study from the Institute for Market Transformation suggested that lenders could offer preferential rates on energy-efficient homes as owners of green properties are 32% less likely to default on their mortgage payments because their energy bills are lower.
Thomas says the bank's decision to expand its green activities has been partly motivated by the government’s decarbonisation targets and she has called on other lenders to pioneer their own green mortgages.
She also hints that Barclays will launch more green financial products this year, and adds: “We hope to be a trailblazer. Hopefully green mortgages are going to emerge as a big asset class – I’m sure there will be many flavours of green mortgage.
"We’re looking at opportunities to innovate. This is what makes being a banker fun!”
HSBC is also represented on the government’s Green Finance Taskforce and is another lender developing environmentally friendly schemes. The bank has pledged to provide $100bn in sustainable financing and investment by 2025 for “clean energy and lower-carbon technologies”.
Where you can find an ethical mortgage
If you are looking for a mortgage from a more ethical lender then you have a number of options.
The Ecology Building Society provides mortgages which promote sustainable housing and communities. This might be through energy-efficient housing, ecological renovation of run-down properties, or small-scale and ecological enterprises.
The society also has a mission to maximise the positive environmental impact of their business. Their greatest impact is from lending – supporting and promoting building practices that respect the environment and sustainable, low impact communities – but the society is also working to reduce the direct environmental impact of their operations.
Organisations such as Ethical Consumer and The Good Shopping Guide suggest that you should consider a mutual lender (a building society) if you're looking for an ethical mortgage.
Based on a range of factors including investment strategy, environmental impact and responsible lending, building societies are seen as a more ethical option due to the fact they lend mainly in the housing market and don't invest in fossil fuels and other unethical sectors.
Lenders that score well from an ethical standpoint include:
- Leeds Building Society
- Newcastle Building Society
- Coventry Building Society
- Nationwide Building Society
- Skipton Building Society
Of the major banks, the only bank on the high street with a clear customer-led ethical policy is the Co-Operative Bank. This policy gives Co-Op customers a say in how their money is used and adherence to co-operative values and ethics is written into the constitution of the Bank to ensure that this vital aspect of their heritage is maintained.
The bank's ethical policy includes commitments to not providing banking services to businesses that conflict with their policy, creating a workplace culture that reflects co-operative ethics, and behaving ethically with relation to relationships with suppliers and other organisations.
The Co-Op has experienced problems in recent years which have put its ethical stance at risk. However, with more than 85% of the bank's 4 million customers stating that they joined the bank because of its ethical stance, maintaining this commitment is central to whichever company buys the struggling bank.
A possible option for the future may be Triodos Bank. The Dutch bank trades on its sound ethical stance, and publishes details of every organisation they lend to on their website. By lending exclusively to organisations who put people and the planet before profits, they claim that their savers' money works to create a positive impact and real returns.
The bank offers current accounts, savings and investments in the UK. If it decides to branch out into mortgage lending in the future, it could certainly be one of the more ethical and sustainable lenders in the market.