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.
ABOUT RICS
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.
BACKGROUND TO
A GREEN
INVESTMENT BANK
(GIB)
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.
MAJOR CHALLENGES
WITHIN THE
UK BUILT ENVIRONMENT
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.
ENGAGEMENT WITH
THE PUBLIC
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.
USE OF
INCENTIVES TO
SUPPORT GREEN
FINANCING
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.
SCOPE OF
A GREEN
INVESTMENT BANK
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.
PROTECTING CONSUMERS:
ENSURING A
PROFESSIONAL APPROACH
TO GREEN
INVESTMENT DECISIONS
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.
ENERGY PERFORMANCE
AND VALUE
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]
FURTHER CONTACT
AND SUPPORT
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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