Insurance as a catalyst for energy efficiency in the built environment – Dual UK

As environmental, social and governance (ESG) factors rise up corporate agendas, energy efficiency in the built environment is becoming a growing priority – especially following an October 2024 article published by Forbes, which found that the commercial real estate sector is responsible for 37% of global emissions.

With more than 50% of the buildings standing today expected to remain in use in 2050, retrofitting existing structures is a critical step in reducing emissions and meeting sustainability targets.

Energy efficiency retrofitting means upgrading buildings to improve their energy performance.

This might involve better insulation, light emitting diode (LED) lighting, installing renewable energy systems, or replacing outdated infrastructure with modern, efficient alternatives.

The cost of energy inefficiency

Building owners face an urgent challenge.

The yield and asset value of their property are under threat if they cannot rent or sell it at full value due to poor energy efficiency performance and ratings.

However, the cost of retrofitting buildings to reduce emissions and energy costs – thereby protecting value – can present a significant drain on funds, especially as these services can be difficult to access.

Businesses that own properties which generate high emissions risk losing tenants, customers and employees who value sustainability. Furthermore, their assets could become difficult to rent or sell.

Improving energy efficiency can have additional benefits aside from lower energy bills and protecting value, however, including creating healthier indoor environments and generating employment in renewable energy industries.

From 2025, all new tenancies in domestic properties will require an energy performance certificate (EPC) rating of C or above and by 2028, this regulation will apply to all rented properties.

The UK government further aims to require all rented non-domestic buildings to achieve an EPC rating of B by 2030.

Which businesses are most affected?

Energy inefficiency affects many sectors.

Social housing providers face difficulties in keeping energy costs manageable for tenants. Schools and universities can struggle to create comfortable learning environments. Businesses risk having buildings that become unfit for purpose or lose value because they are expensive to run and do not meet modern standards.

Without action, the consequences of energy inefficiency will grow.

Property owners may face higher energy bills, reduced asset values and even legal or regulatory penalties.

Meanwhile, the people who live or work in these buildings will continue to bear the burden of rising energy costs and uncomfortable conditions.

The financing gap

A major barrier to retrofitting buildings is the cost. These projects often require a large upfront investment, with the financial benefits spread out over many years.

For social housing providers, local authorities and businesses without access to affordable finance, these projects are often out of reach.

External financing can help overcome this problem, with long-term loans or other funding mechanisms making retrofitting more affordable. However, lenders and investors need to feel confident that their money is secure and will be repaid. This is where insurance comes in.

Dual UK aims to create and deliver products that make a meaningful difference for clients. This ambition inspired the first product from its climate risk and resilience team, which strives to support the transition to more sustainable and energy efficient properties.