A new way to fund social housing decarbonisation

Retrofit Credits scheme

Housing Associations’ Charitable Trust (HACT) and Arctica Partners have developed a project, Retrofit Credits, which is a carbon credit scheme whereby organisations, businesses, and corporates can ‘buy back’ carbon credits by investing in the decarbonisation projects of social housing providers.

This will allow providers to access funds which will both reduce emissions and create social value for communities and residents. It offers a standardised approach to measuring emission reductions and social value created by retrofitting homes. This will assist providers in conducting more measurable retrofit programmes and allow targeted reporting of goals achieved.

HACT has outlined the process of the scheme as:

1. Decarbonisation – the social housing provider enrols housing stock which could benefit from retrofit works to improve the thermal efficiency of the homes and/or reduce the carbon output of the heating source.
2. Calculate Reductions and Social Value – using the Verified Carbon Standard, Arctica calculates the potential emission reductions and projected funding available from Retrofit Credits. Using the UK Social Value Bank, HACT calculates the social value generated by the retrofit works.
3. Credit and sale – once retrofit works are complete, Arctica originates Verified Carbon Units (Retrofit Credits) with the Verra Registry backed by the certified emission reductions. Verra is responsible for ensuring the uniqueness and integrity of the credits issued. Retrofit Credits are sold by HACT and Arctica and the social housing provider receives payment for the emission reductions and social value created or uses the Retrofit Credits generated to offset their unabated emissions. [1]

The programme is expected to issue 21 Retrofit Credits for up to 21 years. Credits will be assigned in relation to the volume of emissions reduced in each case, with one credit equal to one metric tonne of CO2. Pricing per credit is likely to vary, with growth in value estimated to increase as more organisations seek to further their Net Zero objectives. [2]

A pilot project has launched to test the methodology and social value outcomes which will run until June 2023. Applications are currently open for the pilot project.

How we can help

Whilst this project would greatly assist social housing providers in funding their decarbonisation goals, you must consider the risk implications involved in correctly calculating the monetary value of social and environmental initiatives.

The quality of data must be paramount to ensure that efficiencies realised are reported. In addition, housing providers must be wary of any potential risk of greenwashing and must ensure that any funds received from this scheme are used appropriately and compliance is strictly monitored.

Our team of experts can offer risk consulting and advisory services to assist social housing providers in ensuring they are achieving their decarbonisation aims in an appropriate manner.

Our Risk Consulting and Sustainability teams can offer reviews focusing on areas such as:

• Data integrity of energy efficiency data held and the methods for collecting
• Asset management programme and ensuring a risk-based approach is taken in prioritising properties for retrofitting works
• Decarbonisation strategy and programme assurance
• Compliance with Building Safety Regulations during retrofit works
• Reporting and monitoring against funding requirements

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[1]RETROFITCREDITS - HACT

[2]Social Housing - News - Housing providers to sell carbon credits under new sector initiative