The Green Investment Bank - Environmental Audit Committee Contents

Written evidence submitted by The Royal Institution of Chartered Surveyors

The Royal Institution of Chartered Surveyors (RICS) welcomes the opportunity to submit its response to the Environmental Audit Committee's call for evidence for its Green Investment Bank Inquiry.


RICS is the leading organisation of its kind in the world for professionals in property, construction, land and related environmental issues. As an independent and chartered organisation, RICS regulates and maintains the professional standards of over 91,000 qualified members (FRICS, MRICS and AssocRICS) and over 50,000 trainee and student members. It regulates and promotes the work of these property professionals throughout 146 countries and is governed by a Royal Charter which requires it to act in the public interest.

At global, national and local level RICS and its members are committed to creating and maintaining a healthy environment not only for today but also for future generations by adhering to the following principles:

Protection of the environment through the preservation of natural capital.

Promotion of social justice by ensuring access to services for the benefit of all.

Support of a healthy local economy, including high levels of employment.


The Wigley Commission has recommended the GIB be established "to support the delivery of the UK's emission reduction targets… The support should be based on a public-private investment model and address specific market failures and investment barriers …" It has also said that the GIB mandate should include "providing coherence … by rationalising existing Government-established bodies and funds (high priority)".

The 2009 Pre-Budget Report established Infrastructure UK to improve the planning, finance and delivery of UK infrastructure and the GIB was to be mandated to invest in the "low-carbon sector", in particular to consider new energy and transport projects. A £40-£50 billion annual investment requirement was identified and has been carried forward by the Commission. The task of addressing specific market failures and investment barriers has also led the Commission to high-level market investment capacity limitations and funding gaps. At the other extreme, the Commission has met "the aggregation challenge" - the institutional framework and capital market problems that make it unlikely that £100 billion of low carbon investment will be achieved in homes and commercial buildings in the way required even if the necessary supply-side coordination existed. The need for a nationally coordinated response is therefore required.

This challenge has led the Commission to a number of suggested capital funding market interventions "to facilitate private investment in low carbon assets at the scale and speed needed to meet our legally binding emission reduction targets until such time as the market can do this alone." In short, the role of the GIB, it has been said, is to make these interventions.


Carbon emissions in the UK stem mostly from homes, businesses and transport. Buildings alone are estimated to be responsible for around 50% of total emissions.

RICS strongly supports the focus on tackling carbon emissions from the existing building stock and views that further step changes are required for the UK to meet its legislated emissions reductions.


RICS maintains that public engagement and support is vital to the success of the green, target-driven investment agenda, particularly post-banking crisis. RICS is keen that this support is demonstrated for the GIB.

RICS is concerned that the £1 billion made available for the GIB in October 2010's Comprehensive Spending Review falls well short of what is required to leverage the necessary finance to support the ambition of the Wigley Commission's Report. RICS urges the Government to provide sufficient financial and political support to the GIB.


The responses of a number of key European countries including Germany and France have included the use of low or zero-interest loans to meet carbon reduction ambitions. Many countries also use a combination of grants and taxation to drive the move to low carbon.

RICS maintains that any funding approaches may need other forms of incentives and regulation to get consumers and businesses on board.

Recent polling conducted for RICS by Comres showed that the British public believed tax incentives (31%), government grants (27%) and the prospect of reduced energy or water bills (25%) are the three factors that would be most effective at persuading the take up of new energy saving measures. Low interest loans were supported by only 5% of respondents.

RICS believes that the property sector and governments will need to identify how to use tax levers at key green touch points. Any changes to tax need to work with the market.

RICS maintains that:

Council tax and business rates is the best way to target all properties. This measure is already transforming the sector in Northern Ireland following work by RICS Northern Ireland.

Any future stamp duty changes should be introduced through a reformed graded system.

VAT should be reduced for sustainable repair and refurbishment.

Direct carbon taxes be considered.

Careful consideration needs to be given to impacts associated with both geographic and demographic factors as certain measures could impact unfairly.

The role of direct grants for improvements should be considered in mitigating against any unintended consequences.


There may be a role for the GIB in helping to refine the design of the financing system for environmental retrofitting to minimise the cost of funds and therefore maximise the effectiveness of the policy. For example, this may involve the use of insurance, guarantees or liquidity facilities both in the mainstream market and also in social housing. The GIB should also provide seed corn funding to build up sufficient scale of receivables to be attractive to bond markets.

RICS urges the government to ensure sufficient resource is allocated within a Green Investment Bank and to invest beyond those resources contained within existing Government-established bodies and funds.

RICS is concerned that, in practice, the GIB will largely focus on capital market interventions in support of low carbon energy generation (high-level, fast-track, focused) and that the range of supply-side interventions needed at the local and individual building level, as well as integrated development solutions at above-local levels, may not receive the necessary focus and reform.

In light of the present funding market failure of sustainable mixed use urban development, RICS believes that the GIB should include this as an area of operation in addition to environmental retrofitting, renewable energy and its other areas of focus.

RICS is keen to ensure that other key projects that underpin sustainability may also be funded. For example, trees, woodlands and forests can play an important role in assisting the move towards a green and low carbon economy.

A proportion of available funding should also be dedicated to business process improvements for small enterprises enabling them to work more efficiently and become more sustainable.


RICS has issued many pieces of guidance on sustainability to its members. In September 2009, RICS released a Valuation Information Paper in relation to sustainability considerations in commercial property and is currently working on a residential sector version. Similar guidance on sustainability has been issued to other key groups such as building surveyors and rural surveyors.

For green improvements under any financing scheme, RICS seeks to ensure:

That professional advice be included within funding mechanisms, without cost to the consumer.

That those providing the advice on measures are independent of those offering the products/solutions.

The benefits both tangible and intangible need to be sold effectively to consumers, and consumers need to be able to trust the advice that they are given.

Because properties are not all uniform, like for like properties need to be benchmarked. BCIS may have some capability in this arena to assist.

Data related to property level energy use and other measures of sustainability must be made more transparent and accessible.

The financial sector will need to play its part to ensure that standards are met by providers thus helping to ensure confidence by consumers.

RICS believes that there is a need for robust standards that protect the public interest. We would welcome dialogue with Government as any new bank is formed to ensure that effective property standards are met and that a professional and trusted approach is applied to the provision of green property advice.


RICS has worked with DCLG to produce a policy report on this topic as part of the Heat and Energy Savings Strategy, with a focus on existing homes.[83]

RICS' research programme has also concentrated efforts on capturing evidence relating to the Energy Performance of Buildings. Evidence from the US[84] is demonstrating a price and rental differential for commercial buildings, research about to be released from the Netherlands shows a similar picture on value for the domestic sector. In the UK, lack of suitable data is hampering research on this topic.[85]


RICS is keen to explore ways to assist the Committee. It is able to field expert members to speak to the Committee formally or informally about how the Green Investment Bank can be delivered.

1 November 2010

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