"Mortgage lenders are expected to play a key role in supporting homeowners to decarbonise but need more consistent and effective plans to do so."
- Kamma CEO, Orla Shields
A new report has revealed the climate plans of 87 UK mortgage lenders to uncover which are best prepared for the transition to a net zero economy.
Climate planning is revealed as highly inconsistent, as the research from Kamma found that 49% of mortgage lenders have no climate plan and only 5% have a plan aligned with the ‘gold standard’ Transition Plan Taskforce framework.
The report reveals that the top 5 climate-leading lenders in the UK are: Nationwide, Ecology Building Society, Handelsbanken, OneSavings Bank, and Lloyds Banking Group.
However, 49% of lenders still don’t have a publicly available climate plan. In contrast, the top lenders all have a publicly available climate plan which is clear and credible. There is more to be done, only 5% have aligned their plan with the Transition Plan Taskforce framework.
Alarmingly, 71% of lenders do not disclose financed emissions (now a legal requirement under the new IFRS standards for climate disclosures). In contrast, the top lenders all transparently disclose the financed emissions associated with their mortgage portfolio. They also all follow the industry-standard PCAF methodology.
The top lenders also included detailed climate targets. They all employ scenario analysis to identify the external dependencies involved in decarbonising their mortgage portfolio, especially the role of government policy (a barrier acknowledged by 87% of lenders). Two top lenders (Nationwide and OneSavings Bank) go a step further to quantify the actual impact of these dependencies on their decarbonisation pathway – ensuring robust and realistic targets.
Supporting mortgage customers to retrofit is core to decarbonising mortgage portfolios, but overall, only a third of lenders include retrofit in their action plan (34% retrofit education, 30% a retrofit financing product). In contrast, all the top lenders outline a clear plan for decarbonising their mortgage portfolio, which is led by a commitment to support customers to retrofit their homes, and with steps already underway.
Two of the top 5 lenders (Ecology, Handelsbanken) made at least a 7.5% reduction in mortgage emissions in the last 12 months. This brings them in line with the UN pathway for annual reductions to stay under 1.5 degrees of warming.
If all mortgage lenders can follow suit, that would be a huge climate win – 7.5% reduction in carbon emissions associated with the UK's 6.8 million mortgaged properties would amount to an estimated emissions reduction of 1.7 million tonnes, equivalent to driving over 8,000 miles by car.
Kamma CEO, Orla Shields, commented: “Mortgage lenders are expected to play a key role in supporting homeowners to decarbonise but need more consistent and effective plans to do so. Our research has revealed a sizeable gap between the most and least prepared lenders. A new government has brought fresh impetus to the fight against climate change, so it's vital mortgage lenders act now to get ahead of future regulations. Drawing insight from those leading the charge is one way to catch up quickly.”
