Every week the Kamma team collates the key headlines on the subject of Property Zero: the path to carbon neutrality for UK homes
Research shows that energy efficiency improvements make a property more valuable, lower emissions, and reduce energy bills
The Green Homes Report released by Rightmove says that a poor energy efficiency rating is fast becoming a reason for buyers to negotiate discounts on property prices, mainly to account for the cost of improvements and rising energy bills. In contrast, more efficient properties are garnering a premium. It is part of a broader trend showing the impact of retrofitting and higher EPC scores on property desirability.
The debate is emerging around the cost and consequences of energy efficiency improvements. Research from Scottish and WWF does a great job of framing the nature and scale of opportunities concerning property decarbonisation. It mainly discusses three benefits: higher sales value, reduced carbon emissions, and ‘low or no’ energy bills. Similarly, a wave of ‘zero bill’ new builds are also gaining attention. A recent video from Octopus Energy founder Greg Jackson describes how homes fitting with efficiency measures, such as solar panels, electric heat pumps, batteries and smart water heaters, will cost £10,000 more to build but run without energy bills, meaning that the additional building cost is compensated within 3 to 10 years.
The question of whether energy efficiency upgrades impact house prices has been debated back and forth in the trade press for months. The lack of definitive data makes it hard to draw firm, forward-looking conclusions but three things are clear:
All three reasons should drive an increase in home improvements in the months and years to come
Article: Improved green ratings can boost sale prices by up to 16% – Rightmove (The Negotiator)
ESG measuring is largely framed as a response to broader challenges, such as climate change. Still, it enables companies to leverage non-financial metrics to differentiate from the competition, improving share price and appeal to investors.
The ESG measurement sector is growing quickly, but rating firms are yet to converge on a unified approach, raising questions of data reliability, comparability and transparency. Without a unified approach, firms are left ‘marking their own homework’, leading to accusations of greenwashing, which threatens the entire industry. Among these, it cites methodological disparities between firms, the lack of market regulation, and the influence of bias from vested interests as areas that need major rethinking. Without clarity around what, why and how companies are being scored, ESG will be a hollow endeavour that misuses company resources and misleads investors, ultimately stymying progress towards legitimate and urgent environmental, social and governmental goals.
The flaws are well documented and are beginning to be actioned upon. For example, securities supervisors are mobilising resources to force market regulation. As referenced in the article, the European Securities and Market Authority has called for evidence on market structure with the aim to identify key characteristics, trends, and how they can work better. Others are proposing alternative methodologies for rating firms that better advance a low-carbon transition.
Kamma’s perspective: A clear, objective, accurate and agreed approach to measurement is needed to benchmark progress and performance against targets. Subjectivity, by contrast, muddies the water and reduces confidence in the entire industry. This is a larger problem when it comes to real estate, the world’s largest asset class, than any other, as inaccurate or incomplete property datasets don’t provide the basis for strong ratings. Kamma has built the most comprehensive and accurate property dataset in response, delivering 36mn environmental property profiles for UK homes. Get in touch to find out more,
Article: The signal and the noise: Measurement of ESG data needs a big overhaul (The Economist)
A report assessing climate-related financial risk and its systemic nature lays the analytical foundations for a macroprudential policy response
A report published by The European Central Bank (ECB) and the European Systemic Risk Board (ESRB) provides an assessment of climate-related risks and financial stability. Its methodology combines climate and financial risk metrics to suggest vulnerabilities, further highlighting how the impacts could be amplified, such as by physical shocks (interdependent natural hazards) and transition dynamics. It goes on to model how climate risks may impact the financial system in a specific order, such as that it is likely to begin with market risk and then extend to credit losses. The analysis supports an argument for macroprudential policy considerations.
The ECB/ESRB report suggests that a coordinated macroprudential policy response is necessary to link together existing macroprudential efforts, address risks that spread across sectors and borders, and to mainstream climate metrics into ongoing financial stability monitoring. At present, no macroprudential instrument is deemed appropriate for climate-associated risks to financial stability.
Kamma’s perspective: The report builds on a growing body of empirical evidence promoting early action to mitigate vulnerability to risk. It also reiterates the unprecedented, path-dependent and widespread impacts of climate change, calling on macroprudential authorities such as ECB and ESRB (i.e., themselves), as well as central banks and financial supervisory authorities to take action. The upfront cost pales compared to future costs if no action is taken! As one of the laggard sectors in decarbonisation, property is under more pressure than most to prove it can withstand future shocks.
Article: Climate shocks can put financial stability at risk, ECB/ESRB report shows (European Central Bank)
As companies and financial institutions prepare to report on the last financial year, February’s Month in Green focuses discussion on new climate-related financial disclosure requirements and how to approach data challenges associated with property-related assets. Click the link below to learn more about how Kamma is meeting data challenges with solutions! We’re using our data […]Read more
At Kamma we know how important it is for you to have the most up to date information at your fingertips. This report will cut through the noise and let you know exactly what letting agents need to know about property licensing. Each month, we give you a full rundown of the latest scheme announcements […]Read more
In the UK, premium listed companies and financial institutions are now required to disclose on how they identify, assess, and manage climate-related risks and opportunities. This currently includes some bigger letting agents. Kamma recently published an ultimate guide covering everything companies and financial institutions need to know about climate-related financial disclosures and how to overcome […]Read more
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