A £250 Billion Opportunity: How fintechs can lead the charge in greening UK homes for Net Zero
One of the newer startups of the Scottish fintech ecosystem, Snugg, is dedicated to making energy efficient homes simple and affordable for everyone. Co-founder Robin Peters spoke to us about his concept of climate finance and challenges, as well as his recommendations for fintech companies entering the space.
In the UK, homes make up a fifth of total carbon emissions, and it is estimated £250 billion pounds of investment is needed to make homes energy efficient if we're to hit our net zero objective by 2045. To get there, the private sector will have to play a significant role in support of that. While investment in large infrastructure projects, such as wind farms, are supported by quite mature financial vehicles, there has been very little progress in innovative finance solutions for homeowners.
“One of the key challenges is that investment related to decarbonising homes is generally quite expensive and intrusive. And frankly, the investment case often isn't very attractive to people,” points out Peters. “So it's quite a difficult nut to crack, but also extremely important.”
Climate finance plays an important role in tackling this challenge because it brings together different elements of the private sector to underpin finance initiatives to help the world achieve its net zero ambition. The goal is to not only direct investment into getting projects off the ground, but it’s also about helping financial services customers to invest in climate-positive activities.
Yet there are a number of barriers that need to be overcome, including the need for more consistent government policy around green incentives, and the fact that general consumers have got to want this more. Further, there needs to be more integration across the supply chain. “People need things to be made simple for better take-up of the pro-climate incentives that are on offer,” explained Peters. “There should be a deeper alignment amongst the different providers across the supply chain, for example, between a trusted installer, the financial provider, manufacturers and the government.”
The financial sector now also has an opportunity to pave the way more seamlessly. Firstly, they can put all their data to more intelligent use by targeting personalised initiatives and engaging with customers in a more meaningful way. Secondly, there is scope for innovation in green financial products, such as pay-as-you-go (where people can repay loans based on savings they have achieved from making their homes more energy efficient) or property-linked finance (where a loan is linked to a house rather than a person). Peters notes a slight degree of reluctance in the financial sector at present, yet he is optimistic that in the future there will be better auditing of banks to assess whether financial products are truly delivering.
His top three recommendations to Scotland's fintechs wanting to incorporate climate concerns into offering?:
- Focus on the data: There's a lot of data out there that can be improved and interrogated for better insights
- See the opportunity: A perception shift is needed to see that this is an opportunity for real innovation. There's a huge investment opportunity for financial services, yet patience is needed as banks can be particularly slow in adopting truly new innovations
- Collaborate: It's an incredibly dynamic market which literally needs to grow by a factor of ten in the next 4-5 years. There's also an enormous amount of innovation, and sharing different ideas with emerging players and other participants will help come up with the best solutions for the market.