Sustainability & Green Funding

Mention sustainability and what do you think about? Solar power and wind farms? Heat pumps and improved insulation? Each of the above, and more, probably. And if you work in construction and related sectors, there'll be other things that spring to mind. In particular, how to balance the upfront costs of sustainability, and the impacts on budgets, all measured against long-term benefits. That's where Green Funding, a form of subsidy for environmental responsibility, starts to feature.

As a major supplier of recycled post-consumer aluminium used primarily in construction, we at TECHNAL has a particular interest in the ways that Green Funding can encourage and facilitate our shared progress towards Net Zero and the implementation of a circular economy.

This article considers the basic framework for Green Funding in the UK, what funds are available, and how to access them. Inevitably, it's not always as simple as you might think. However, there are still clear pathways which favour a business which is well organised and clear about how it can contribute to the improved protection of the environment.

What is Green Funding?

Green Funding is the process of providing finance to support new construction, infrastructure, or land management projects which will have positive environmental and climate benefits. The simplest example is developers building new 'eco' or Smart housing. All decisions prioritise the use of sustainable materials and construction methods, and long-term reduction of carbon footprints.

However, it is broader than that. Green Funding can support a range of projects, varying from replacement of legacy heating systems in public buildings and the choice of recycled materials in road building, to support for climate change adaption and cleaner and healthier travel options.

Unsurprisingly, Green Funding comes with eligibility and reporting criteria. In some cases, application windows are short, such as 6 weeks, and funds can be available only for very specific purposes.

The UK Framework

Overall, the vehicles for Green Funding in the UK are split between:

• Green Financing - financial decision making with climate and environmental factors integrated by default, and

• Financing Green - public or private finance tied to a cleaner environment and environmentally sustainable economic growth

The government promotes these against the background of the UK's 2023 Green Finance Strategy.

Broadly speaking, Green Funding is available via:

• Public funding for infrastructure projects

• Public funding for retrofitting of greener heating and insulation to public buildings and social housing, and the development of Heat Networks - local shared heating schemes

• Public funding of awards (sometimes because of competitions) which promote innovation to achieve and support Net Zero

• Public funding via organisations and institutions which are under government control, such as Network Rail and the NHS

• Local Government funding - ultimately often funded by central government - for environmentally responsible projects (examples could include green transport initiatives and other "small" infrastructure projects)

• Private sector funding such as Green Loans and Green Bonds, typically available on better terms than would other be available

• Private sector Environmental, Social and Governance (ESG) investment funds

• Not for Profit organisations, often community focused and relatively small in value

Who is Eligible for Green Funding?

In theory, there is no limit to eligibility, provided the funding applied for matches the scope of the funding body. There is something of a warning here: Green Funding is typically time limited, especially when publicly funded. Thus, some well-known schemes, like the Public Sector Decarbonisation Scheme (PSDS), are currently closed for new applications. Whether and when they re-open will probably be political decisions based on government finances.

However, businesses might still benefit. Where a large project is planned the main contractor will have a network of partners and suppliers. They in turn may have their own supply chain. Manufacturers of low-carbon products, for example, will therefore still have the opportunity to promote their goods and services to contractors at various stages in the project life.

Private Sector Green Funding

Although not as widely recognised as public sector schemes, private sector finance plays a significant part in the market. These can be varied, but fall into two broad categories.

Green Loans

For banks, providing an incentive by way of discounted interest rates or other beneficial terms serves more than one purpose. It provides a meaningful and genuine way to promote low or lower carbon projects (rather than those which pay no specific regard to the environment) and it helps them meet their own targets for sustainability.

Major banks in the UK now offer green loans or sustainability-linked lending specifically tailored to fund sustainable building projects. These loans can fund projects like renewable energy installations, energy-efficient building systems, eco-friendly materials and pollution control systems. For example, a developer can take a green loan to finance installing solar PV, high-efficiency HVAC, or battery storage in a new development. According to the British Business Bank, about 11% of UK SME's that take action on net zero have used external finance to do so.

Sustainability-Linked Loans & Bonds

These are loans or bonds where the interest rate (or coupon) is linked to the borrower's sustainability performance based on predefined metrics, such as a NABERS score - an energy efficient rating for commercial premises. The funds raised can be for general purposes (they are not restricted to green spend only), but the company commits to improving its environmental performance and is financially rewarded for success or penalised for failure.

This has a clear application to the construction industry and can act as a significant incentive to deliver. Providers of sustainable materials, products, and services therefore have an opening here, either to borrow under these schemes or to partner as a supplier to a developer who is doing so.

A Green Future Beckons - now is not the time to hesitate

Within all sectors of the construction industry there will continue to be significant opportunities to use products and services designed for sustainability. Thresholds and specifications may vary between funding criteria, but despite hints of government uncertainty in this respect, many businesses and bodies have already adopted structured approaches to Net Zero, with current and future sustainability centre stage.

A good example is the Royal Institute of British Architects (RIBA). Their 2030 Climate Challenge sets ambitious targets, supported by a Sustainable Outcomes Guide. In terms of manufactured products and construction materials, these include the move the Net Zero embodied carbon. This is a clear invitation to suppliers of low carbon materials and those manufacturers (like TECHNAL) already producing products using premium quality recycled end of life materials at high levels. TECHNAL's Hydro CIRCAL® 75R and 100R aluminium, for example, are 75% and 100% recycled, post-consumer material respectively - considerable higher than currently expected thresholds and the market average.

In fact, the RIBA's initiative is well placed to have sector-wide influence, helping to drive standards and in particular within commercial and industrial developments. The RIBA Sustainable Outcomes Guide, while options, has an impact both upstream and downstream of the design process. Suppliers of equipment, materials, and expertise will have an increasing advantage as substantial investors like pension funds aim for ever improving levels of sustainability.

Other routes to Green Funding

There is a potentially bewildering array of sources of information and funding in this field. So, to keep things simple, and in addition to funding types mentioned above, the following are useful places to start.

Find Funding

Salix Finance is a government owned lender, focused mainly on administering key public sector decarbonisation funds for energy efficiency and heat networks. Most of their schemes are now closed, with further application windows pending. However, their website contains useful information and is worth tracking for notices of renewed funding.

Gov.uk Find a Grant is the government listing of currently available grants. Many are aimed at individuals and SME's, but it also contains schemes that might be useful to fabricators, building owners or suppliers of specialist equipment and materials, including those which are low-carbon and sustainable. It includes the option to sign up for notifications of new grants.

Finding the Future

At TECHNAL, we are optimistic about a sustainable future. As a leading brand for aluminium doors, windows and facades, and with our commitment to circularity and sustainability, we are always searching for partnerships where we can maximise recyclability and low carbon construction.

One of the challenges of that process is that of clients accepting cost implications. Going green is not always the cheapest option, although we work to make it so. Sometimes support via Green Funding can make a significant difference and it can encourage clients to commit to sustainability in the long term. Green Funding can be the difference between project viability and indefinite postponement. So, it's worth actively looking for it. Keep an eye out for application windows, new or renewed funding schemes, and suitable private finance deals. Every step towards full sustainability is worth it.

All information quoted in this article was accurate on publication but be aware that Green Funding opportunities and criteria can change. Always make fresh enquiries and check all details carefully before taking action. Mention of specific organisations does not imply endorsement or affiliation.