We have products to help

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We have products to help

In a nutshell:

Ireland has set out ambitious targets for emissions reduction in the National Climate Action Plan, the most recent iteration being published in 2023 (‘CAP23’).

The IMF estimate that meeting these targets will require investment of close to €20 billion annually over the coming 10 years, of which one third will come from public capital spending with the remainder requiring private financing.

With a significant 35% market share for consumer credit, Credit Unions must play a vital role in meeting the financing needs of their Members with products that are aligned to and support meeting the targets of CAP23.

What this means:

In terms of the overall objectives of CAP23, previous CAPs and decarbonising Irish society, the table below sets out the primary targets and in turn, the products Credit Unions might offer to help in meeting those targets:

CAP Section	Built Environment	Transport	Industry / Enterprise	Various Chapters – Community
Headline Targets	– 500,000 homes retrofitted to B2 – 400,000 Heat Pumps installed	– Up to 840k EVs. – Overall reduction in cars and phase out petrol/diesel	– Up to 95k commercial EVs – Embed decarbonisation measures across all businesses.	– Increase number of Sustainable Energy Communities to 1,500
Credit Union Loan Product to Support	– Green Home Improvement Loan – Green Mortgage	– Green Car Loan	– Green SME Loan unsecured – Green SME Loan secured	– Green Community Loan
Key Loan Features	See section below	– Flexibility to borrow over longer term, especially for new EV with long warranty – Flexibility to incorporate ancillary costs, e.g. charger install	– Ability to cater for various needs of SME borrowers, including fleet upgrade, building retrofit and investment in resource efficiency	– Ability to meet the needs of local Sustainable Energy Communities – See ‘We have a social impact’ for more information

Deep dive on green home lending:

Home lending will be, by far, the area of green lending where Credit Unions will provide the most finance over the coming decade so we’ll consider here in a little detail how Credit Unions may be positioned to help.

There are lots of supports for Members

For homeowners, there are many options available, which are represented by the various schemes and supports available through the SEAI and elsewhere. As a trusted financial services provider, the role of the Credit Union will be, in the first instance, to have suitable lending products available which offer excellent value for money. Ideally however, each Credit Union will also undertake staff training to familiarise frontline staff with the multitude of supports available from the SEAI and other State backed schemes, so that they can best advise Members on the options that might be available to them. A snapshot of schemes that may be available to Members are set out below;

Retrofitting activity will ramp up significantly

The various schemes set out above cater to a range of different needs, from those hoping to buy a home to those already in their home. From a Credit Unions perspective however, the schemes that will be most prominent in day-to-day lending activity will be those relating to existing homeowners seeking to retrofit their home.

A number of challenges, not least the pandemic, delayed the initial rollout and adoption of retrofitting, however through the efforts of the SEAI and Government, a significant escalation of retrofit activity is now underway and this will continue into the future.

Upwards of 50 thousand retrofits are expected to be completed each year once maximum capacity is reached, these will be delivered under 3 main options for residential retrofits (Sustainable Energy Communities are another option covered under the ‘We will have a social impact’ section);

One Stop Shops
Individual Energy Upgrade Grants (Better Energy Homes & Solar PV); and
Fully Funded Energy Upgrades (comprising Warmer Homes).

Full details on each of these options are available from the SEAI but in the most basic sense – One Stop Shops provide generous grants and benefits for those retrofitting a home to B2 or higher, individual grants are smaller sums available to those carrying out one or more qualifying upgrades on their own but not meeting a B2 rating. Fully funded upgrades are available to applicants in receipt of specified social welfare benefits like fuel allowance.

Right product for the right person at the right time

This plethora of grant options exist because there is no ‘one-size-fits-all’ solution for purchasing and/or retrofitting a home. Different Members, at different life stages will have varying needs and the products available from the Credit Union will require an appropriate level of flexibility to cater for the needs of all Members.

Where a Member is looking to undertake a small handful of upgrades, supported by Better Energy Homes grants, these can typically range in cost from €2,000 to €20,000 per upgrade and traditional home improvement lending with terms up to 5 years will meet this need. The net cost associated with retrofitting a home to B2 however may be €40,000 or more. For many Members this will require the loan to be spread over a longer term – either by way of a Green Mortgage or a special category home improvement loan over a longer term and at a lower rate.

The table below sets out a number of personas of Members each Credit Union is likely to encounter, together with the loan product that might support them and the schemes that might be available to them.

Persona	CU Loan to Support	Schemes that may Help
Younger couple looking to buy first home – new build, A rated.	– Green Mortgage	– First Home Scheme – Help to Buy Scheme
Younger Member looking to purchase older house to renovate	– Green Mortgage – Green Home Improvement Loan in tandem with mortgage from CU or alternative source	– One Stop Shop – Vacant Property Grant – Possibly septic tank, lead pipe, and pyrite/mica grants and schemes
Middle aged couple with mortgage from bank looking to retrofit their existing home	– Green/Switcher Mortgage – Green Home Improvement Loan	– One Stop Shop – Better Energy Homes and Solar PV Schemes
Middle aged Member on social welfare looking to purchase their council home	– Green mortgage	– Local Authority Affordable Purchase Scheme – Warmer Homes Scheme
Retired Member looking to retrofit their home	– Possibly none – Green Home Improvement Loan	– Warmer Homes Scheme – One Stop Shop – Better Energy Homes

Community Lending:

Community lending is a natural fit for Credit Unions. It is an area that will align the social and environmental aspirations of the Sustainability Strategy. Please see the section ‘We will have a social impact’ for further consideration of community lending.

Did you know?

For Credit Unions who offer a Green Mortgage, they account for 30% of their total mortgage lending. The average green mortgage is 35% larger than a typical mortgage, on a property that has a 30% higher value. On average, it is advanced over a term that is 3.5 years longer to borrowers who are 4 years younger with €15,000 higher annual household income.

Steps that won’t take much effort:

Review the Credit Union product suite, are you meeting the needs of all Members – those seeking to undertake a retrofit, purchase an electric vehicle, decarbonise their business or engage with their local Sustainable Energy Community?
Speak with others – seek out local tradespeople who work on retrofits and EV charger installations, Members who have completed or are considering retrofits or EV purchase, local Sustainable Energy Communities and external stakeholders like other credit unions and the SEAI. They will each have valuable insight on the needs of Members.
Undertake regular staff training so that all frontline staff are aware of the supports available to Members who are purchasing an energy efficient home or retrofitting an existing home to a higher rating.

Steps that will have a big impact:

Where your Credit Union offers mortgages, ensure you have a dedicated Green Mortgage. Remember when pricing, you can expect this loan to be bigger and over a longer term so this should be reflected with a lower rate.
Partner with an SEAI approved One Stop Shop or local Sustainable Energy Community. These will be an invaluable resource for your Members who are hoping to learn more about retrofitting.
Have products that meet the needs of your Members and make helpful information available in one place (See: Capital Credit Union Green Zone)

Watch outs:

In the future, Credit Unions may be expected to report on their Green Asset Ratio. While we don’t need to get bogged down in this just yet, it might be best practice to future-proof for this now by clearly defining ‘Green Lending’ and the terms and conditions attaching from the outset.

“Green’’ lending describes any form of financial product or service to fund activities which are low carbon at the time of borrowing. In contrast, “Transition” lending describes any form of financial product or service to fund activities that contribute to the Transition to a net-zero emissions economy by 2050.

So, by way of example, a green home improvement loan may require a home to be retrofitted to a minimum BER of B2, undisputedly a loan for a low carbon purpose that is aligned with national targets. By contrast, a simple loan for just attic insulation which does not bring the property to a B2 rating might be considered a transition loan, a traditional home improvement loan, or a pathway loan. This approach would also greatly assist in protecting the Credit Union from accusations of ‘greenwashing’.

Resources:

National Climate Action Plan 2023 –

https://www.gov.ie/en/publication/7bd8c-climate-action-plan-2023/

National Climate Action Plan 2021 Infographic, a handy guide to the main targets –

https://www.gov.ie/pdf/?file=https://assets.gov.ie/203546/a183a324-40ed-49c9-b630-bab0fbdd2ce2.pdf#page=null

SEAI Explainer on Home Energy Grants –

https://www.seai.ie/grants/home-energy-grants/

SEAI Explainer on EV Grants –

https://www.seai.ie/grants/electric-vehicle-grants/

SEAI Explainer on Business Grants –

https://www.seai.ie/business-and-public-sector/business-grants-and-supports/

List of SEAI approved One Stop Shops –