According to a survey by the Green Finance Institute (GFI) in 2022, nearly nine in ten people consider the energy efficiency of their home to be important, but only a fifth are likely to use existing types of finance to fund upgrade works.
In direct response to this, the GFI has developed a new financial instrument called Property-Linked Finance (PLF) that is now set to be tested in Greater Manchester.
PLF will support homeowners by funding up to 100 per cent of the upfront costs of energy efficiency improvements, with the unique characteristic that the finance is ‘linked’ to the property, rather than the property owner.
This directly addresses the so-called ‘payback period barrier’ problem, whereby homeowners are deterred from retrofitting as the energy bill savings over their expected time living in the property are not sufficient to make it financially worthwhile. PLF is also secured finance, which enables much longer repayment periods and lower individual repayments.
A similar finance mechanism, PACE, is already used in the US and has to date mobilised nearly $10 billion of financing towards energy efficiency improvements across 323,000 homes, creating 141,000 green jobs.
PLF is now being trialled along with a suite of other finance solutions in a new partnership between the GFI and the Greater Manchester Combined Authority (GMCA).
Households trialling PLF in the city region will receive funding to pay for energy efficiency upgrades, which will then be repaid through their property tax bill.
Other solutions to be tested include:
“Local Authorities have a deep understanding of their residents’ needs and increasingly recognise the opportunities to work with the private finance sector to deliver access to finance for their citizens. We are excited to collaborate with GMCA and the market to pilot a portfolio of innovative financial solutions the GFI has been developing since its inception in 2019, demonstrating a new model for local authorities across the UK.”