Underwriting Perspectives: Insurance as a Catalyst for Energy Efficiency in the Built Environment

According to Forbes, the commercial real estate sector is responsible for 37% of global emissions, and as ESG rises up the corporate agenda energy efficiency in the built environment is a growing priority. Pressure is also coming from the UK Government, who have decarbonisation targets, investor requirements for sustainable properties, customers and employees opting for comfortable environments to live and work, a rise in employees choosing companies who recognise and act on their climate impact responsibilities, and rising energy costs.

As the global carbon budget narrows, pressure to decarbonise the built environment is mounting. 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.

The cost of energy inefficiency

Owners of all types of buildings—offices, hotels, schools, social housing, industrial units, and more—confront 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 (notwithstanding ever-increasing energy prices). However, the cost of retrofitting buildings to reduce emissions and energy costs—and thereby protect their value—either presents a significant drain on funds intended for other purposes or remains difficult to access.

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

Improving energy efficiency can also have many additional benefits to lower energy bills and protecting value, including creating healthier indoor environments and generating employment in renewable energy industries. The benefits go beyond just cutting carbon emissions—they can make businesses and communities stronger and more resilient.

The need for energy efficiency retrofits

From 2025 all new tenancies in domestic properties will require an 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 Energy Performance Certificates (EPC) rating of band B by 2030.

Energy efficiency retrofitting means upgrading buildings to improve their energy performance. This might involve better insulation, LED lighting, installing renewable energy systems, or replacing outdated infrastructure with modern, efficient alternatives. For example, many schools in the UK have old RAAC (Reinforced Autoclaved Aerated Concrete) that needs to be replaced for safety reasons. Renovation presents an opportunity to improve the energy performance of these buildings at the same time, making them safer, cheaper to run and more sustainable.

Who is 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 don’t meet modern standards.

Without action, the consequences 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 as 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 through long-term loans or other funding mechanisms, resulting in retrofitting becoming more affordable. However, lenders and investors need to feel confident that their money is secure and will be repaid, and this is where insurance comes in.

Insurance as a catalyst for change and force for good

Insurance can play a key role in unlocking finance for energy efficiency projects. By providing guarantees to investors, insurance can give them the confidence to fund retrofits.

The insurance industry has a history of driving progress. A good example is HSB’s work during the industrial revolution in the 1870s. At this time steam boilers were essential to industrial growth but were also untested, dangerous and prone to explosions. HSB developed and offered insurance for these boilers and set standards for their design, inspection and maintenance. This not only reduced risks but also accelerated industrial development.

Today, we face a similar challenge with the need to transition to more sustainable buildings. Insurance can play an important role in making this happen, helping to reduce financial and operational risks and to enable progress. By supporting retrofitting projects, the insurance industry can help create a future with lower emissions, better buildings, and stronger communities.

DUAL Climate Risk & Resilience

The Climate Risk and Resilience team at DUAL UK comprises a renowned group of expert underwriters and insurance and risk consultants. Each team member has spent their career innovating, delivering solutions, and underwriting risks that address the existing and emerging challenges faced by our clients—particularly in the environmental and legal risk sector.

At DUAL, our goal is to create and deliver products that make a meaningful difference for our clients. This ambition inspired the first product from the Climate Risk and Resilience team: supporting the transition to more sustainable and energy-efficient properties.

Conclusion

Improving the energy efficiency of buildings is essential for a sustainable future. It can reduce emissions, cut energy costs for corporate and individual tenants, protect valuations and yields and create healthier and more comfortable living and working spaces. However, the upfront costs of retrofitting remain a major obstacle.

Insurance can support and accelerate decarbonisation challenges by unlocking the finance needed for these projects. At DUAL, we’re committed to leading the way with solutions that make retrofitting achievable. This is why we have created a product that combines insurance with investment backing and leading building tech to make these projects viable.