Leading the reduction of all carbon in residential homes

Why act now?

For two centuries, human activity has slowly but irreversibly changed the Earth’s climate.

Amid the rhetoric and statements of intent, there is agreement on one thing: the best way to limit the damage is to slash the amount of carbon released into the atmosphere. The UK is one of many countries to have made a legal commitment to reduce its carbon emissions to net zero by 2050.

Hitting that target requires a national effort, and we in the property sector have a big part to play, as the sector is responsible for 40% of the UK’s carbon emissions.

 

The carbon problem we must solve

Since 2007, the residential property sector has relied on the Energy Performance Certificate (EPC) as a measure of how much energy a property might consume in-use. However, an EPC neither includes unregulated energy use nor considers embodied carbon, and so it does not reflect the true carbon impact. Sustainability is also not considered in EPCs.

To tackle carbon emissions from residential homes, the full impact of carbon must be measured and drastically reduced. There are four elements that must be considered:

    • Embodied Carbon: the carbon emitted during the construction phase. 11% of all global carbon emissions come from embodied carbon.
    • Operational Carbon: the carbon emitted through living in the property. 28% of global carbon emissions come from operational carbon.
    • Drinking water usage: domestic drinking water usage is intrinsically linked to energy consumption. Water companies are some of the largest energy users in Britain.
    • Sustainability: reducing carbon requires an ecosystem of measures that have direct and indirect consequences on carbon emissions, meaning a broad sustainability approach is required.

Imagine if housebuilding were to follow the lead of commercial real estate, by actively encouraging and facilitating low-carbon construction and operation, while also rewarding both developers and end-users who choose to go green.

Imagine if smart capital, seeking sustainable financial and non-financial returns, could find a home that delivers all of that by building greener homes.

Key facts

of the UK's carbon emissions are a result of the built environment (UKGBC)

  • 40%
  • 8%
  • 340,000
  • 49%

Introducing the Carbonlite Challenge Pilot

Between November 2021 and June 2022, we will be testing a new ground-up development lending solution aimed at tackling the challenges of embodied and operational carbon, water usage and sustainability.

Working with support from the Royal Institute of British Architects and a panel of expert collaborators, we aim to cut carbon in the built environment by seamlessly connecting capital seeking low-carbon opportunities with the most ambitious low-carbon property developers.

Sustainable development finance from just 4.99% Fixed.

Carbonlite Challenge Scorecard






Sustainability Outcome Metrics
Current Business As Usual Performance (compliance route)
On track against RIBA Challenge v2 2025 target
On track against RIBA Challenge v2 2030 Target
Operational energy
kWh/m2/y

120 kWh/m²/y

<60 kWh/m²/y

<35 kWh/m²/y

Embodied Carbon
kgCO2e/2

1200 kgCO2e/m²

<800 kgCO2e/m²

<625 kgCO2e/m²

Potable water use
Litres/person/day

125 l/p/day

<95 l/p/day

<75 l/p/day

Current Business As Usual Performance (compliance route)

Sustainability Outcome Metrics
Operational energy
kWh/m2/y

120 kWh/m²/y

Embodied Carbon
kgCO2e/2

1200 kgCO2e/m²

Potable water use
Litres/person/day

125 l/p/day

Commercial terms
Up to
Up to
Up to
LTGDV
60%
65%
70%
1. Minimum Standard Rate
6.99%
7.25%
7.99%
2. Carbon & Sustainability Rate
0%
0%
0%
3. Effective Interest Rate (3=1-2)
6.99%
7.25%
7.99%
Minimum Standard Fee
1% Arrangment 1.5% Exit
On track against RIBA Challenge v2 2025 target

Sustainability Outcome Metrics
Operational energy
kWh/m2/y

<60 kWh/m²/y

Embodied Carbon
kgCO2e/2

<800 kgCO2e/m²

Potable water use
Litres/person/day

<95 l/p/day

Commercial terms
Up to
Up to
Up to
LTGDV
60%
65%
70%
1. Minimum Standard Rate
6.99%
7.25%
7.99%
2. Carbon & Sustainability Rate
1.50%
1.50%
1.50%
3. Effective Interest Rate (3=1-2)
5.49%
5.75%
6.49%
Minimum Standard Fee
1% Arrangment 1.5% Exit
On track against RIBA Challenge v2 2030 Target

Sustainability Outcome Metrics
Operational energy
kWh/m2/y

<35 kWh/m²/y

Embodied Carbon
kgCO2e/2

<625 kgCO2e/m²

Potable water use
Litres/person/day

<75 l/p/day

Commercial terms
Up to
Up to
Up to
LTGDV
60%
65%
70%
1. Minimum Standard Rate
6.99%
7.25%
7.99%
2. Carbon & Sustainability Rate
2.00%
2.00%
2.00%
3. Effective Interest Rate (3=1-2)
4.99%
5.25%
5.99%
Minimum Standard Fee
1% Arrangment 1.5% Exit
Commercial Terms
_
Up to
Up to
Up to
Up to
Up to
Up to
Up to
Up to
Up to
LTGDV - Up to
LTGDV
60%
65%
70%
60%
65%
70%
60%
65%
70%
1. Minimum Standard Rate - Up to
1. Minimum Standard Rate
6.99%
7.25%
7.99%
6.99%
7.25%
7.99%
6.99%
7.25%
7.99%
2. Carbon & Sustainability Rate - Up to
2. Carbon & Sustainability Rate
0%
0%
0%
1.50%
1.50%
1.50%
2.00%
2.00%
2.00%
3. Effective Interest Rate (3=1-2) - Up to
3. Effective Interest Rate (3=1-2)
6.99%
7.25%
7.99%
5.49%
5.75%
6.49%
4.99%
5.25%
5.99%
Minimum Standard Fees - Up to
Minimum Standard Fees
1% Arrangment 1.5% Exit
1% Arrangment 1.5% Exit
1% Arrangment 1.5% Exit

*In exceptional circumstances, rate may be subject to loading, should any additional risk be identified during the credit process.
The performance targets quoted within the table are aligned with the RIBA 2030 Climate Challenge Vs2 (2021 edition), which is referred to throughout this document as the RIBA Challenge Vs2. See here.
The targets are to be attained in-use, based where relevant on best practice predicted usage for the 12 months post-completion. Projects that enable this level of in-use performance to be achieved when occupied are classified within the Carbonlite Challenge score card as ‘enabled’ and ‘on track’.

ITEM
CRITERIA
Security
1st legal charge, guarantees
Security types
Residential only in pilot phase
Project types
Ground-Up Development only during pilot phase
Treatment of interest
Rolled or serviced
Interest type
Fixed
Gross loan to GDV
70%
Max loan to total cost
90%, 100% development costs
Min/Max loan term
12-24 months
Min/Max loan size
£3m - £10m
Third party mezzanine and second charges
Considered
Geographical lending areas
England, Scotland & Wales
CURRENT LENDING PREFERENCES
  • Projects designed by a RIBA architect and supported by a professional team capable of providing data relating to energy, carbon and sustainability
  • Professional developers with a track record of ground-up developments
  • Smaller developments of residential houses and apartments
  • Urban and brownfield locations

How the Carbonlite Challenge works

To help explain how this works, we've pulled together a tutorial video - hear from our experts on how we've got to where we have, how our pilot programme works and how you can follow us on our Carbonlite Challenge journey.

Carbonlite Challenge: How It Works

  1. Carbonlite Challenge Sustainability Charter

    To be eligible for the scheme, the borrower must agree to abide by the Carbonlite Challenge Sustainability Charter. The borrower must also seek to instil and promote the charter’s principles, where appropriate, within the practices of its suppliers. Details are available at www.carbonlitechallenge.co.uk.

  2. Carbon & Sustainability Assessment Form

    The borrower must submit a completed Carbon & Sustainability Assessment Form. The information is usually available from the project’s professional team.

  3. Initial Carbon & Sustainability Assessment

    On receipt of a completed Carbon & Sustainability Assessment Form, Atelier will estimate the project’s Carbon & Sustainability Score. The RIBA 2030 Climate Challenge targets are used for this assessment.

  4. Carbon Offsetting

    A score or part of a score can be improved using responsible and prudent carbon-offsetting techniques. These can be targeted to improve a score from being on track against the RIBA 2030 Climate Challenge v2 2025 target, to the 2030 target. Restrictions and limits apply. The lowest score determines the overall score. For example, if a project is scored as ‘on track towards the RIBA 2030 Climate Challenge v2 2030 target’ in all areas except one (that is scoring lower), the lower score applies.

  5. Indicative Terms and estimated Carbon & Sustainability Rebate

    Once the score is estimated and the viability of the scheme is understood, Indicative Terms will be issued with details of the expected Carbon & Sustainability Rebate.

  6. Full Carbon & Sustainability Assessment

    Before drawdown of the loan, Atelier will recalculate the Carbon & Sustainability Score and make any adjustments as necessary.

  7. Onsite Carbon & Sustainability Assessment

    Once the facility has drawn, Onsite Carbon Assessments will be carried out periodically until the property reaches Practical Completion. A final score will be calculated confirming that the project is on track and enabled to meet the RIBA 2030 Climate Challenge v2 2025 or 2030 targets.

  8. Carbon & Sustainability Rebate

    On full repayment of the loan, the Carbon & Sustainability Rebate is paid to the developer.

  9. Post-Occupancy Evaluation

    After 12 months’ use by the homeowner, Atelier will receive energy and water data, and will undertake a Post-Occupancy Evaluation. The study will include recommendations, which will be shared with the homeowner and used to make further improvements to the Carbonlite Challenge scheme.

  1. Carbonlite Challenge Sustainability Charter

    To be eligible for the scheme, the borrower must agree to abide by the Carbonlite Challenge Sustainability Charter. The borrower must also seek to instil and promote the charter’s principles, where appropriate, within the practices of its suppliers. Details are available at www.carbonlitechallenge.co.uk.

  2. Carbon & Sustainability Assessment Form

    The borrower must submit a completed Carbon & Sustainability Assessment Form. The information is usually available from the project’s professional team.

  3. Initial Carbon & Sustainability Assessment

    On receipt of a completed Carbon & Sustainability Assessment Form, Atelier will estimate the project’s Carbon & Sustainability Score. The RIBA 2030 Climate Challenge targets are used for this assessment.

  4. Carbon Offsetting

    A score or part of a score can be improved using responsible and prudent carbon-offsetting techniques. These can be targeted to improve a score from being on track against the RIBA 2030 Climate Challenge v2 2025 target, to the 2030 target. Restrictions and limits apply. The lowest score determines the overall score. For example, if a project is scored as ‘on track towards the RIBA 2030 Climate Challenge v2 2030 target’ in all areas except one (that is scoring lower), the lower score applies.

  5. Indicative Terms and estimated Carbon & Sustainability Rebate

    Once the score is estimated and the viability of the scheme is understood, Indicative Terms will be issued with details of the expected Carbon & Sustainability Rebate.

  6. Full Carbon & Sustainability Assessment

    Before drawdown of the loan, Atelier will recalculate the Carbon & Sustainability Score and make any adjustments as necessary.

  7. Onsite Carbon & Sustainability Assessment

    Once the facility has drawn, Onsite Carbon Assessments will be carried out periodically until the property reaches Practical Completion. A final score will be calculated confirming that the project is on track and enabled to meet the RIBA 2030 Climate Challenge v2 2025 or 2030 targets.

  8. Carbon & Sustainability Rebate

    On full repayment of the loan, the Carbon & Sustainability Rebate is paid to the developer.

  9. Post-Occupancy Evaluation

    After 12 months’ use by the homeowner, Atelier will receive energy and water data, and will undertake a Post-Occupancy Evaluation. The study will include recommendations, which will be shared with the homeowner and used to make further improvements to the Carbonlite Challenge scheme.

Our Collaborators

Preparing the Carbonlite Challenge has been quite a journey. Building a solution this complex required us to team up with some of the industry’s top experts, and forge a collaboration to successfully make building lower-carbon homes financially attractive and deliverable.

You can hear more from RIBA on their approach and perspectives here

UK Housing: The Race to Zero Net Carbon is On

At Atelier we’ve spent a lot of time researching climate change and deciding how we as a company should respond to the challenges before us. The UK has pledged to achieve net zero carbon emissions by 2050, and this fast-approaching goal is helping us focus our energies on areas where we feel we can provoke debate and bring about meaningful change - by sharing our research we hope we can assist others in starting their carbon reduction journey too.

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General enquiries

If you're interested in finding out more about the Carbonlite Challenge, then please leave your details and a short message and one of the team will be in touch.