January 14, 2002
UK Bank Offers Green Mortgages
by Susan Wennemyr
Financial institution efforts to be more environment-friendly are proving popular with customers.
Co-operative Bank, a British bank owned by The Co-operative Group, has gone out on a limb to
provide its customers a "carbon-neutral" mortgage product. The bank conducts free energy checks on
financed buildings to determine how much carbon is needed to operate them. It then plants trees in
Uganda to offset the projected emissions while helping indigenous populations.
Co-operative Bank has contracted Climate Care, an organization devoted to offsetting carbon
emissions, to plant trees in the Kibale National Park in Uganda. The park had been home to a
rainforest that was destroyed by refugees fleeing Idi Amin's rule. Climate Care aims to reforest
the area, now covered in elephant grass, with a new forest canopy to shade out the grasses and
encourage repopulation of native species. The Kibale Project benefits the local area not only
through employment, but also by improving the environment in a way that promotes ecotourism.
Co-operative's innovative mortgage is one of a fleet of ethical products, which are determined
primarily by the views of its customers on topics relevant to the bank's activities. According to
Barry Clavin, Ethical Policy Manager for Co-operative, approximately one-third of the bank's
customers select the bank because of its exemplary ethical practices.
The bank has seen
profits nearly double since 1997. In the first half of 2001, Co-operative made a profit of £60
million, up 9 percent from 2000.
Courtney Peyton, an Edinburgh-based sustainability
consultant to the property and construction industries, stresses that "thinking sustainably is as
much a commercial need for business to reduce risk and capitalize on value as it is for individuals
who care about making more responsible choices."
Such mortgage practices are on the rise
in the UK. Ms. Peyton predicts that ethical mortgages will constitute 1 percent of the British
mortgage market in the next two years.
Tony Blair's government is largely responsible for
the rise in green construction and financing. Committed to Kyoto standards, the UK has among the
most ambitious goals in the EC: reduction of emissions by 20 percent of 1990 levels by 2010.
The countries of the UK all fall subject to Blair's jurisdiction with respect to greenhouse gas
emission. But with regard to some areas of construction, they set standards independently.
Scotland will make government funding of housing contingent upon project satisfaction of
sustainability standards in construction.
Other British banks are offering their own
versions of green mortgages. The Ecology Building Society lends only on properties with an
ecological payback: old houses needing renovation, new homes made of recycled or sustainable
materials, or residences that optimize energy efficiency. The Norwich & Peterborough Building Society, like Co-operative,
plants trees to offset carbon emissions. It also reduces its mortgage rate to borrowers who improve
the energy efficiency of their property.
Green mortgages are not unique to the UK. Fannie
Mae, the largest financier for home mortgages in the U.S., announced its $100 million "Home
Performance Power Initiative" in February 2001. The initiative kicked off with the publication of
a guide to buying and maintaining environment-friendly or "green" homes. The initiative then
launched a series of $10 million pilot programs designed to support local lending for affordable,
environmentally sound home-building in the Phoenix region of Arizona, in Central Florida, and