Sustainable trends in bridging … Are we FINALLY moving on from EPC ratings?



I must have stopped and started this article six or seven times.

In each version the angle changes, swinging wildly from uplifting to disappointing. Bold to cautious. Curious to frustrated. I’m going mad.

The truth is that the link between bridging loans and sustainability is subtle and slow.

Each lender is doing something different, but very few incentives are latching on properly.

Many “green” bridging loans do more damage than good

In recent years, some bridging products have been self-marketed as “green”. These tended to be loans to develop new builds with a minimum energy performance certificate (EPC) rating of C. Nowadays it’s usually A.


But that’s not good enough. Probably you don’t need me to tell you that clearing land of wildlife, constructing a building with materials like concrete and generating skip-loads of waste does more damage to the environment than any EPC rating could ever compensate for. Obviously, right?

Construction is responsible for around 10 million metric tons of carbon a year. That’s the weight of 555,555+ double-decker London buses. Each year.

Any financial product that does more damage than good for the environment cannot be marketed as “sustainable”. That’s not me saying it. That’s the European Union Law. This month, the rule was also implemented – with some variations- into UK regulations with the Sustainability Disclosure Requirements. As the FCA phrase it, sustainable finance must “do no harm to other environmental or social factors”. The UK Taxomony Regulation is also coming soon, where this will be spelt out more definitively.

Fines and potential legal implications

Regulated firms providing financial products need to adhere to strict rules about how “green” they can claim to be. According to the FCA, they must, “prepare for the new anti-greenwashing rule if they make claims about the sustainability characteristics of their products or services, to ensure sustainability claims are fair, clear and not misleading

Even for those bridging firms that are not regulated by the FCA, the CMA has also joined the anti-greenwash movement. Customers now have more rights to sue companies for misleading green claims under the Consumer Protection Act.

The walls are closing in on over-worked fake green loans. As the Head of the FCA warned, fines “will come”.

Perhaps because of this clamp-down, the number of lenders promoting “green” loans has shrunk over the past months. Interestingly, those that do provide them tend to buddy-up with another organisation now. Safety in numbers. We seem to have a lot of “alliances”, “initiatives” and partnerships with movements that have a bit more eco-credibility. Greener Homes Alliance springs to mind.

Sure, there are still some dodgy ideas of what counts as “green”, even within these partnerships. But overall, the new wave of green loans are starting to look a bit more, well… green.

Loans to restore abandoned properties and retrofits

A small handful of bridging lenders are moving in a promising direction. Or at least, where the focus on EPC ratings no longer takes centre-stage. Octopus Real Estate springs to mind. As part of its (yep) Greener Homes Alliance with Homes for England, it’s renovating existing properties like abandoned cafes, so precious wildlife can remain untouched. Any new developments seem to be in already built-up areas like Tottenham.

Octopus is also incentivising renewable energy infrastructure, rather than relying on the sad old EPC rating spiel. Which, let’s just say it, are soon to be a legal requirement for landlords anyway.

Octopus has been a strong retrofitter too. Providing loans for existing properties to get energy-efficient upgrades makes so more sense than building from scratch. Surely that’s the only time an EPC-linked loan could be called “green”?

But, before you think I am going too soft, Octopus is not perfect. It’s worth noting that only a minority of the homes are affordable, so the S in ESG probably needs more work!

Reducing waste with modular builds

Another burgeoning area of green bridging lending is underwriting modular builds. This has been simmering under the surface for some years but has huge potential. In the words of Bain & Company, it generates “less waste and fewer emissions”, as “improved designs use less material and may be more recyclable”.

Investec Real Estate and Impact Capital are two of the lenders making strides in this exciting area. In November 2023, Investec provided a £11.85 million loan to a modular development specialist.

The UK’s modular construction is fast-growing. And interestingly for bridging lenders, “the majority of companies in this sector have a good-to-excellent score, based on their ability to service short-term debt”.

So much power, so little time

While a handful of bridging lenders carry the torch with retrofits and modular lending, sadly the majority do still seem to rely on EPC ratings as a main source of “green-ness”. And it sucks because bridging lenders have so much power to create change. Where is the creativity?

If a lender said, “I’ll give you this slightly lower interest rate if you plant a tree on the land, and commit to looking after it for five years”, how much carbon could be saved? How much flooding prevented? How many pollinators supported? And how much shade created in the heatwaves?

The roots of trees soak up water, preventing floods and making properties more insurable. That’s a win for everyone, right? That’s just one idea. There are thousands of different ways lenders can promote sustainability. Thousands.

It’s everyone’s future, and bridging lenders have funding pools full of incentives. I hope they start to use them soon.