Most green mortgages today rely heavily on Energy Performance Certificate (EPC) ratings. If properties are energy-efficient (A or B rated), they can get lower rates and qualify for a discount. Or if homeowners renovate their property - for example, with insulation or solar energy - they can get cash back. That's the premise (ish) of most green mortgages.
It makes sense to prioritise energy efficiency. After all, heating up our homes accounts for around 17% of the UK's carbon emissions. What's more, our notoriously patchy insulation, cranky boilers and gas reliance means that we waste a lot more than our European neighbours.
But that's not the only thing mortgage providers can do. Inspired by a recent Fintech Talents Lending 3.0 panel, here are some ideas for additional green bolt-on options.
👉 Switch to a green pension for a discounted mortgage rate 💚
Switching to a sustainable pension is the most impactful thing we can all do to improve our carbon emissions. Research from Make My Money Matter found that it's 27 times more effective than going vegan for life and never flying again.
So, here's the idea. Simply switch your pension to get a discounted interest rate. Or cash back. Tah daahh. A super easy and impactful way to reduce carbon emissions with mortgages.
...Or if you reallllyyyy want to play into behavioural economic theory... Customers' mortgage rate will go UP next year, UNLESS they switch to a green pension.
(It's because financial loss hurts more than the joy of a gain. So, doing things this way round tends to be more effective. There was this whole economic experiment on monkeys - very useful reading for those in marketing! We really need to lean into behavioural economics to meet our climate goals).
👉 One for farmers: Discount for going organic 👩🌾
Biodiversity! I know it sounds gross, but we really need bugs. As scientific journalists like Jeff Ollerton point out, "Pollinators are our secret weapon in the fight against global warming". We have pollinators like bees to thank for 75% of the world's food, and around one in three bites of everything we eat. These humble heroes are essential for the fight against the climate crisis, because they fertilise plants and basically keep everything growing.
For certain properties, such as farms, it would be much more environmentally impactful to get them to stop using pesticides. Of course, ensuring that they have a good EPC ratings at home is great too. But not as important as going organic.
So here is my simple idea... Go organic and get a better mortgage. So many farmers are forced into going down the pesticides route just to make ends meet. If you can help them make the right choice, I'm sure many would!
For bigger banks, it could be the start of a beautiful relationship. Support organic farms across all the banking services you offer. Business accounts, financing or saving accounts.
For community banks, you could partner-up! Offer retail customers vouchers or incentives for organic vegetables, produced by the local farm. There is a LOT of room for stickiness, profit and imagination here.
👉 Mortgage for landowners: Discounts for hedgerows 🐝
This one was inspired by my grandparents, Essie and Martin, who have some fields in West Wales. Some years ago, they made the environmental decision to let their hedgerows grow out. It means there is less land for them, but much more for nature. Since 1850, the UK has lost a staggering 84% of its hedgerows. It's had dire consequences on the environment, especially for wildlife and soil degradation.
We need to bring hedgerows back. They soak up carbon emissions, allow nature to thrive, and help keep pollinators moving.
Hedgerows are also a great defence against flooding. Their roots soak up excess water. The more hedgerows on the land, the less water. This is SUPER RELEVANT for mortgage lenders. Hedgerows reduce the risk of property - and neighbouring towns - from going underwater. Can mortgage lenders AFFORD to ignore this? Hedgerows are a real risk-reducer. Especially for areas that are prone to flooding.
My idea is super simple. Offer preferential rates for hedgerows, and keep it going. A little bit more discount for every metre. Come on, you've got to admit, that's a real win-win.
👉 Commercial Mortgages: Preferential rate if you take an emissions audit 👩💻
Businesses need mortgages too. Family-run hotels, warehouses, offices... As of the end of 2020, it's a £33.6 billion industry.
There's a huge opportunity here to incentivise sustainability. One idea is to offer an emissions audit for free, and if the borrower takes it they can get a small discount.
The following year, if the borrower takes another (free) audit and their emissions are lower, they benefit from the same lower rate. And on... and on... Clever right?
I'm sure if banks use the same emissions auditor for all their customers, they could secure a MASSIVE discount. And, this kind of programme would help attract new business customers who care about their emissions but are not sure where to start. Plus, it might win the bank a few awards... Basically everyone wins something with this kind of approach.
👉 Sustainable materials for new builds 🏠
Modular building methods cut carbon emissions by 40%, and reduce construction waste by 95%! Surely any mortgage provider should be putting this front and centre of their new build strategy? An easy way to incentivise sustainability would be to offer favourable rates to modular homes.
👉 More trees, less interest 🌳
Imagine if your mortgage provider offered you the chance to decrease your rate, in exchange for planting a tree. The more trees you plant, the less interest you pay.
What if your bank even offered to send someone around to plant the tree for you? That would be a game-changer. You'd get something for nothing, help the planet, and save money. Would anyone in the world say no to that?
How could banks afford this kind of programme? Well, there are schemes available. Check out the England Woodland Creation Offer. For every hectare of trees planted, you could get £13,000. Or look into selling carbon. Companies that emit carbon pay offsetting credits. Could mortgage providers use the gardens of customers to create a new revenue stream?
Customers would get lower interest rates. Mortgage providers could diversify their income flows. Companies can offset. And the planet gets trees. LUSH. 👌
👉 Flower box monthly cash back 🪴
Our inner cities are deprived of nature. But ordinary people living in flats or estates help can change that. Flower boxes, planters and hanging baskets are essential for saving pollinators, improving air quality and even reducing carbon emissions. So, here's my simple idea to engage city people and normalise sustainable living...
Customers send in a picture of a bee or a pollinator enjoying their flower box and they get £10 cash back. Or they pay £10 less towards their mortgage. They can do this once a month, to enjoy a max £120 saving each year.
There are so many ways you could market this campaign. It could be a great way for kids to earn their pocket money! Or to pay for a big family day out. The campaign could be called something like BEEEE THRIFTY! Or FLOWER SPENDING POWER. Or something fun like that.
With all the new data opportunities, it would be possible to GPS track the photos to avoid fraud. If we're going to move into a less private world, it should at least be to save the planet and make people a little wealthier, right?
For renters, this could be part of a savings account product instead of a mortgage. Or kids savings account. There are a bunch of Junior ISA or Junior SIPP opportunities.
Imagine if all of London's 9+ million people had a flower box. Imagine!
👉 Offer discounts for energy-saving services 🤑
I'm a member of pure gym, and that gives me discounts on a range of sporty brands. Why can't mortgage providers do the same thing? Team up with companies to provide discounts or incentives for...
Insulating curtains
Garden centres
Solar panels
Retro-fit insulation
Double-glazing
Heat pumps
Train passes
Bikes
Local bike storage units
Sustainable homeware
Who Gives A Crap Toilet Paper (Or just provide 50 rolls as a gift)
Hyper-personalisation and creativity 🚀
Finance is moving in super exciting directions. Things which were not available a couple of years ago are possible now. AND there is infinite room for sustainability.
Here's an example. You're doing your weekly shop. And you know that if you buy all your vegetables from Europe, you will get 2% cash back. You'd avoid that high-carbon asparagus from Peru.
Now imagine if you get 5% cash back for buying only locally grown vegetables. You'd give it a good try, right? Over time, these British veggies will pay for themselves!
Well, that technology is kind of possible. Transaction data, hyper-personalisation and embedded finance are working together in amazing ways. We can be incredibly purposeful about what we want to achieve. We can influence people at the point of sale to make more sustainable choices. We can lean into behavioural economics to help customers make greener decisions. The world is literally at our fingertips... And the planet is in our hands. 🤲
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Thank you to Fintech Talents for inviting me to Lending 3.0.
If you would like to use any of the ideas in this article, please feel free! They are quite rough and so I would recommend doing a lot of research first. While this blog is intended to be helpful, it's not advice.
If you liked this post.... Check out everything I learned about Embedded Finance at Fintech Talents 2021 😝 It's full of juicy sustainable ideas and banging quotes.