Working towards a green society
Long-standing CEO of Ecology Building Society, Paul Ellis, talks to Chris Evans about a range of green issues, from the impact of Extinction Rebellion and fracking in Argentina to a newly-set-up green finance task force
“This is the time when organisations and individuals are realising that we do need to make a response,” insists Paul Ellis. “There is a generational transformation going on. We have to be vigilant and make sure the old attitudes of ‘green washing’ don’t rear their ugly heads. It used to be that corporate social responsibility was just another marketing ploy. The time for that is over.”
Ecology Building Society could certainly not be accused of green washing. It has been leading the way on the green agenda for nearly 40 years, since it was set up in 1981. Back then it was committed to low impact living and protecting the environment. “The concerns were more about pollution and bio-diversity, with climate change looming in the background,” says Ellis, who joined Ecology in 1995 as its CEO. “It’s been interesting to see the science develop and the wider community catch up with the issues to the point where this year feels like a tipping point.”
Indeed, the building society sector itself is responding to this changing environment with a number of players – from small locals to major nationals – meeting in October to discuss the formation of a Green Finance Task Force to help tackle this problem and marshal the sector behind the provision of green finance.
“I don’t think it would have been possible to have our meeting even a couple of years ago, so it shows how things are changing,” enthuses Ellis. “There were about 15 building societies at the meeting. It was a room full of passionate, relatively senior managers who wanted to make a difference. Many are at the start of the journey. We’re obviously a little further along, but the intention is to come to a range of solutions.”
Emphasis has been placed on pushing through green mortgages. This is something that has been the cornerstone of Ecology’s agenda since it began. It has been committed to helping finance environmental building renovations and support sustainable development. Since 1981, it has lent to over 3,000 projects, supporting individuals, charities, environmental businesses and community-led housing organisations to realise their sustainable living ambitions.
Ecology is also now looking to form partnerships with other companies in the supply chain, such as energy assessors and contractors, in order to “make the prospect of undertaking what can be substantial and complicated work much more palatable to the end user”, Ellis insists. “This will involve holding the hands of individuals who don’t have all the information and know-how but want to do it.
“We’ve been involved in a number of pilots to test different approaches. Some are more community based, and others are more straightforwardly commercial. But the intention is to carry out build and renovation projects quickly and efficiently.”
This is vital and necessary work. There is a frightening number of properties in this country that need to be retrofitted to meet reasonable energy efficiency standards in a short space of time. “To reach the government’s 2030 target for halving energy use of buildings, we’d probably have to retrofit 250 homes per hour across the country. We’re obviously nowhere near that, so there’s lots to do. Therefore, part of our focus is encouraging other players into the market.”
Already we’ve seen Barclays adopt a green mortgage offering for those buying an energy efficient new-build property from one of its partner house builders. The property needs to have an efficiency rating of 81 or above, or be in energy efficiency bands A or B, for buyers to get lower rates on certain fixed rate mortgages. Other banks and building societies are also starting to enter this arena.
But part of the problem, Ellis concedes, is that we are in a lower rate environment, so that may slow down the rate of adoption: “Barclays’ green mortgages are really just lending on properties that would have been built anyway. We need to go beyond that. At Ecology, we’re looking at the construction phase too, which is a little riskier and more difficult, but it’s where we see the gains can be made.”
Ellis believes the mutual sector is well placed to think this issue through and produce the right responses. Indeed, he is very confident about the sector in general, which he thinks has outperformed for its size in the mortgage market.
Going digital
But where the sector can and should certainly improve is its digital offering. Much like its traditional bank brethren who are competing against the challengers, there is a danger that the building societies could be left behind the digital technology curve, or even become obsolete.
“A lot of our processes are overly manual or based on legacy technology,” says Ellis. “We have members of staff who are younger and don’t particularly want to bank with us until they can do everything on the app. We’ve traditionally been passport-based, but are taking steps to eliminate them altogether, hopefully by the end of this year. We have also formed partnerships to take advantage of modern and effective digital ways of working, including with ClearBank.”
Interestingly, because many of the building societies have remained manual in their processes, they could potentially adopt new banking platforms a lot quicker than some of the larger banks burdened by legacy IT systems. Once connected, the opportunities to network across the supply chain and with the customer will be a lot easier.
“There’s already a national database of properties we can tap into with details about their energy efficiency characteristics, home passports, and a log of what measures have been taken out on the property,” enthuses Ellis. “So, with a particular project, you can interrogate what the current situation is with your property, and then effectively try and design your own plan. But we are also looking to introduce better access to basic information like energy performance certificates using application programming interface techniques to map our mortgage books to the nationally available information.”
The intention is to share knowledge and tools between the building societies so that the sector can progress on the green and technology front. Although they obviously can’t be too collaborative on end-product design, as that might spill into pricing.
Government support
But they need the government agenda to remain firm, clear and sustainable to support them in their goals. “We need to ensure we get a stable policy base from government to undertake our agenda,” Ellis says. “For example, it is talking about bringing in the Future Homes standard by 2025, which is great, but we already know what’s going to be in it, so let’s bring it in a bit quicker, and not abandon it after two or three years, or be contradictory, as has happened before.”
He cites a few recent examples, including the government’s decision to use £1bn set aside to support green energy, infrastructure and healthcare, to invest in the fracking industry in Argentina instead, and the Home Information Packs and Zero Carbon Homes initiatives, which were introduced then pulled. “What that does is create a climate where industry and business will be sceptical about whether it’s wise to invest in green and ethical practices,” he warns.
Overall, Ellis is more confident than he’s ever been about change in attitude and determination to see actual results on the ground. “We’ve seen what the City of London are doing with the Green Finance Institute, as well as the policy initiatives on sustainable finance from the EU, and a series of initiatives from the government in its determination to get to net zero by 2050. These are all positive signs.”
He is equally encouraged by the Bank of England’s requirements for financial institutions to incorporate climate risks into their books. “There has been some criticism that it’s not enough, but it’s tough in a sector where some are ahead of the curve and others don’t really want to recognise the problem, even showing wilful ignorance of the issues. But getting them to explain why they don’t think it’s an issue for them is certainly something to build on.
“Some of the larger financial institutions may even need to transform their asset base over time, but this is necessary. It is important we don’t operate in an ethical cul-de-sac, but that this becomes widespread,” Ellis concludes