Financing the retrofit challenge
Intervention Point
Financing the retrofit challenge is expensive and requires new alternative financial solutions for the built environment. These need to blend public and private sector actions, including increased data collection, more extensive risk modelling in light of anticipated policy changes, and blended finance products to mobilise capital at scale.
Current situation
With 80 percent of the predicted 2050 building stock already existing today, Europe is in desperate need of retrofitting at scale to meet the EU’s Paris-aligned 1.5ºC goal. Currently, 75 percent of the EU building stock is considered to be energy inefficient and less than 1 percent per year is undergoing a retrofit.
While there is a growing urgency to retrofit the European building stock to achieve climate goals, there remains a hugely significant investment gap, as retrofits that involve building electrification and energy efficiency measures can be expensive.
The alternative is asset stranding, which is a critical risk for investors, and also bad for cities. It is important to maintain the quality of the urban environment and have the physical infrastructure of cities in-use rather than abandoned. Otherwise, this poses risks of urban degradation and could cause a snowballing effect that can result in negative social outcomes such as reducing people’s wellbeing and increasing levels of crime.
The industry needs to work towards financial solutions that promotes retrofitting at scale with work already being done to support this on data collection to show the financial case for retrofits; assessing and quantifying transition risks; the use of green leases; and innovative financing solutions through blended finance.
How to get involved
To de-risk energy efficiency investments, data and knowledge sharing of cases is invaluable through initiatives such as the De-risking Energy Efficiency Platform (DEEP).
ULI C Change launched its Transition Risk Assessment Guidelines for Consultation in June. These provide a common methodology to assess and disclose transition risks as part of property valuations.
For more information about possibilities to get involved, please contact sophie.chick@uli.org
Interested in finding out more? Click here to download the full technical briefing.
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Last updated: August 2023
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