With Australia’s state and federal governments looking to improve energy efficiency in residential property, the banking industry is set to play a vital role in helping Australians make their homes more liveable and eco-friendly. The next step will be to create a standardised methodology for rating a home’s sustainability – and comprehensive property data could be the key to achieving this sooner.
As sustainability and energy efficiency reach the forefront of the national conversation, banks are gearing up to become part of the solution. This includes playing a vital environmental advocacy role, providing green solutions and partnering with government on key policy design initiatives.
Increasingly, the major banks are demonstrating their commitment to net zero emissions goals. One approach is through sustainable lending, which helps customers fund energy-efficient property upgrades.
“As Australians become more conscious of the environment and their lifestyle, government and private enterprise are looking at policy frameworks and product offerings that optimise consumer adoption,” said Milena Malev, CoreLogic Australia’s General Manager of Banking and Finance Solutions.
“Consumer demand is already there, but we need clear guidelines and collaboration between banks, government and data providers to help Australian communities build and maintain eco-friendly homes.”
A global push for sustainable solutions
Around the world, governments are driving a shift towards sustainable finance solutions for residential property – although it is arguable that Australia and New Zealand are lagging.
In the UK, for instance, legislation mandates that all residential property sales must be accompanied by an energy rating certificate. Similarly, rental properties are required to meet minimum efficiency standards before they can be tenanted.
“The Energy Performance Certificate (EPC) is used under Government legislation to require energy companies to install energy-efficient measures on properties,” explained Rob Cartwright, Energy Solutions Director for CoreLogic UK. “In recent years, it has also become a pre-requisite to have an EPC in place before marketing a property for sale or rental.”
Other government-led initiatives in the UK include low-cost finance options aimed at improving energy management. “There are now 13 green mortgages available, which offer a slightly reduced rate based on the energy efficiency of your home,” Rob said. “That discount can be a big incentive for property owners.”
While a heavy focus in the UK has been on creating energy-efficient social housing to reduce energy bills for people on low incomes, the government is now putting pressure on lenders to report the energy efficiency of their overall mortgage portfolio.
“The next natural step for the government is to steer market behaviour by requiring lenders to publish the average energy efficiency rating of their portfolio. We are already seeing Lenders react to this and we are supporting them with initiatives to understand the energy efficiency ratings of their portfolio and identify mechanisms to improve it” Rob said.
The opportunity for Australia
Australian households are directly responsible for around 20% of our national greenhouse gas emissions. This presents a significant opportunity to make a meaningful impact on our overall carbon footprint. As political will and momentum build at both the state and federal levels, Australia is likely moving closer to a standardised energy rating that mirrors the UK model.
However, there are fundamental differences between the two countries, from housing profiles to environmental factors such as climate and weather patterns.
According to Ryan Williams, Head of Government Strategy at CoreLogic Australia, from an execution perspective, we actually face fewer challenges and costs in making our homes more energy efficient.
“In many ways, it’s more affordable to improve energy efficiency in Australian homes compared to the UK, largely because of insulation and heating price barriers in the UK market,” he said. “Locally, solar panels can have a far bigger impact on energy savings and quality of life, and they often require less capital upfront.
“What’s more, because Australia isn’t as far advanced in this process as the UK and European markets are, we have the advantage of observing what has worked well in international jurisdictions and applying best practice here.”
The role banks can play
Ultimately, a key driver behind a push towards eco-friendly housing is likely to be cost savings to homeowners, with Australians welcoming any move that has the potential to reduce their energy bills by hundreds of dollars each quarter. Plus, there’s a growing appetite for green finance solutions among consumers who want to make a difference and are actively seeking out socially responsible lenders.
With their commitment to achieving emissions targets, it follows that banks have a vested interest in helping their customers make environmentally friendly decisions. In response to any growing consumer interest in green loans, banks can likely play a key role in working with governments and data providers to develop suitable and effective scheme, data and technology solutions for the entire Australian property market.
Through green lending programs, consumers can already take advantage of interest-rate discounts to finance certain energy-efficient equipment such as solar, insulation, lighting or building materials. Further developing these programs could enable property owners to incorporate energy-saving measures into their overall mortgage, with the costs paid off gradually over the life of the loan. Any upfront costs for green improvements may be more than offset by reduced spending on heating and cooling, as well as savings to the electricity network.
This is unlikely to be a risky proposition for banks, who may benefit from the value these improvements will add to their mortgage portfolios. According to data from The Economist Intelligence Unit, 68% of investors and 63% of issuers say their sustainable investments perform better than their traditional equivalents. It’s therefore unsurprising that several major banks are already promoting mortgages specifically designed to accommodate energy improvements. In some cases, customers can also access specialist expertise to help them plan and manage these projects for their homes.
“In Australia, we’ve seen the Commonwealth Bank recently launch a green loan for renovations that upgrade a home’s energy efficiency,” said Ryan.
Powered by property data
Property data can play an important part in supporting the assessment, installation and reporting of energy-efficient measures for Australian homes. It may also be used by industry stakeholders as a tool while they work together to guide consumers along the end-to-end journey. Since lenders already rely on data providers for comprehensive and timely property information and analytics, they can look to data providers to provide data to help the customer understand a property’s environmental credentials so they can make educated purchase decisions.
In the UK, CoreLogic is already powering the process by delivering software that allows domestic energy assessors to collect information and produce EPCs onsite. This is often combined with marketing solution packages for properties, which includes photos, virtual tours, floor plans and EPCs. “These tools are designed to support energy companies and supply chains to deliver on their obligations, and to manage the customer journey through the installation process,” Rob said.
Using CoreLogic’s innovative assessment tools, homeowners can enter information about their property to identify recommended options for energy improvements, as well as indicative costs. These tools can also be used to filter out new-build properties, so energy providers don’t spend time and resources on site visits to properties that don’t need upgrading. Meanwhile, CoreLogic UK is also developing the capability to incorporate EPC data into its products and services, which could help prospective buyers search for properties that have high energy-efficiency ratings.
In Australia, CoreLogic already operates a vast property database, highlighting enormous potential to tap into pre-existing data and develop a standardised method for collecting and inputting energy efficiency ratings.
“We can already see how CoreLogic is delivering and maintaining solutions internationally,” said Milena. “With growing demand for energy-efficient solutions in Australia, CoreLogic has the expertise and capabilities to connect the property ecosystem and the energy sector to make a real difference in the sustainability space, supported by rich data insights.”
 UK Government, https://www.gov.uk/buy-sell-your-home/energy-performance-certificates
 NSW Government, Supporting energy efficiency upgrades for existing homes through informed policy and program design: finance industry perspectives, July 2021.
 The Economist Intelligence Unit, Financing sustainability: Asia Pacific embraces the ESG challenge, February 2020.
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