Measuring the alignment of real economy investments with climate mitigation objectives
The United Kingdom’s buildings sector
This paper explores data and methods to assess the alignment or misalignment with
climate mitigation objectives of investments in the construction and refurbishment
of residential and non-residential buildings. It takes the United Kingdom (UK) as
a case study, where such investments reached GBP 162 billion (EUR 184 billion) in
2019 or 39% of UK gross fixed capital formation. The analysis trials different reference
points that lead to varying results and each currently come with limitations in terms
of coverage or granularity.
Sector-level greenhouse gas (GHG) trajectories indicate that, in aggregate, investments
in UK buildings have been insufficient, delayed or not aligned enough with caps set
by UK Carbon Budgets, but such trajectories currently lack disaggregation for a more
granular and insightful matching with investment data. Energy performance certificates
(EPCs) allow for asset-level analyses: for instance, 79% of 2010-2019 investments
in new built residential were in relatively energy efficient buildings but only 1%
were consistent with more demanding recommendations towards the UK’s objective of
reaching net-zero GHG in 2050. The coverage and reliability of EPCs, however, needs
to be improved for older buildings, whose deep retrofitting is a major financing challenge.
Applying Climate Bonds Initiative criteria for low-carbon buildings identifies investments
eligible for green bond financing, but such criteria have partial sectoral coverage
and are based on currently most efficient buildings within the existing stock, which
makes them relatively easy to meet for investments in new built.
Producing more complete and policy relevant assessments of aligned and misaligned
investments at national and sectoral levels requires the availability of and access
to comparable and granular data on decarbonisation targets and pathways consistent
with the Paris Agreement temperature goals, GHG performance of assets, corporate and
household investments, as well as underlying sources of financing.
Published on March 29, 2021
In series:OECD Environment Working Papersview more titles