With the UK’s commitment to net zero by 2050, financial incentives for sustainable construction have never been more valuable or more accessible. From grants and tax reliefs to green loans and planning advantages, there are compelling opportunities for developers to reduce costs and enhance project viability while supporting environmental goals.
This guide is for property developers, landlords, and in-house teams looking to tap into funding for eco-friendly projects. You’ll learn what incentives are available, how to qualify, and where legal support can make a difference, so you don’t miss out on the funds and reliefs that could transform your next project.
Need help navigating the legal side of green funding? Speak to our commercial property solicitors today and take the first step towards unlocking the full value of sustainable development.
Contents:
- What are green development financial incentives?
- What types of financial incentives are available for green property developments?
- How can developers qualify for grants, tax reliefs, or funding programs?
- What are the common legal challenges in accessing these incentives?
- How can legal advisors assist developers in optimising funding opportunities while ensuring compliance?
- Summary
What are green development financial incentives?
The urgent need to address climate change has led to a growing demand for sustainable development practices across various sectors. To support eco-friendly practices in construction and site development, governments and organisations are offering financial incentives. For developers, there are many benefits in leveraging these opportunities including:
- Reducing development costs and improving ROI
- Gaining a competitive edge by adopting green practices
- Aligning with market demand for sustainable properties
Whether you are a seasoned developer or just starting out, landlord, or in-house advisory team to such organisations, you don’t want to miss out on tapping into these lucrative projects.
What types of financial incentives are available for green property developments?
As the UK government intensifies its commitment to achieving net-zero carbon emissions, financial incentives for sustainable building practices have become more lucrative. These incentives not only foster environmental ambitions but can also enhance the profitability of development projects. Examples of financial incentives that you can potentially tap into include:
- Grants and funding schemes: various schemes exist for developers incorporating sustainable construction practices and building materials into their developments, such as energy-efficient/renewable energy/low-carbon technologies and systems. This may include harnessing wind and solar power, water-saving technologies or smart grids. Examples of schemes that have been available include the BEIS Energy Innovation Programme which aims to accelerate the commercialisation of innovative clean energy technologies and processes into the 2020s and 2030s with a £505 million budget.
- Taxes, expenditure, and business rate reductions: different types of ‘green reliefs’ and exemptions may be available for property developers, owners and businesses who invest in renewable energy technology and operate in more eco-friendly ways, including:
- Green energy technologies exemption allows businesses situated in England to claim relief on business rates for certain plant and machinery used for onsite renewable energy generation and storage
- Low-carbon heat networks exempt businesses from paying business rates on the infrastructure associated with generating and distributing low-carbon heat.
- Landfill tax relief enables property developers to claim a tax deduction for the costs incurred in cleaning up contaminated land. This can be particularly beneficial for redeveloping brownfield sites into sustainable projects.
- Enhanced Capital Allowances (ECA) allows businesses to claim 100% of the capital costs of certain energy-saving technologies against their taxable profits in the year of investment. Although the scheme has now closed, there may be other incentives along these lines available in the future as the government strives to achieve its net-zero target by 2050.
- Local authority schemes - Many councils and local authorities run initiatives to promote sustainable development. These may include development grants, reduced planning fees/expedited processes for eco-friendly projects, or direct financial support for projects that align with local sustainability goals. Developers should engage with local councils to discover what is available in their area.
- Green loans and investment funds - an increasing number of financial institutions are offering green loans specifically aimed at funding sustainable construction projects. For example, the UK Infrastructure Bank has played a vital role in funding green projects across the country. Established to support the government’s commitment to achieving net-zero carbon emissions, the bank focuses on investing in sustainable infrastructure through the provision of loans and equity investments to green projects, making it easier for developers to secure the funding needed to start and expand such initiatives.
- Sustainability-linked bonds - the proceeds from these bonds are used to finance projects that improve environmental outcomes. Investors are drawn to these bonds as they align with their sustainability goals, potentially providing developers with access to capital at competitive rates.
- Public-Private Partnerships - these collaborations between local authorities, private investors, and businesses can enhance financing opportunities for green projects. This helps share risks and benefits while driving innovation.
How can developers qualify for grants, tax reliefs, or funding programs?
Start by researching the various grants, reliefs and funding programs available and understanding their eligibility criteria. Each scheme will have its own specifications. It is important to review these carefully to ensure your project aligns with the goals of the particular scheme available. This may include factors like project size, location, and the specific sustainability goals being pursued.
Then develop a comprehensive proposal that outlines the objectives, benefits, and sustainability aspects of your construction project, highlighting how it aligns with the goals of the funding program. The key here is to showcase that your project adopts sustainable practices. This might include the use of renewable materials, energy efficiency measures, waste reduction strategies, and environmentally friendly building techniques.
You may need to obtain relevant sustainability certifications, such as BREEAM (Building Research Establishment Environmental Assessment Method) or the Passivhaus standard, which can add credibility to your project.
While your aim may be to access financial incentives available, you may still need to demonstrate the overall viability of your project including other funding sources, site analysis, technical feasibility, and regulatory compliance.
Engaging with professionals who have experience in sustainable construction and familiarity with funding applications is key in this industry. Government policies and funding programs are constantly evolving, so connecting with industry experts about any changes or upcoming opportunities is key if you do not want to miss out. Our commercial property solicitors can provide valuable insights and assist with the application process.
What are the common legal challenges in accessing these incentives?
Attempting to access green financial incentives isn’t straightforward. Property developers often encounter challenges including:
- Eligibility criteria: developers may struggle to fully understand or comply with the specific eligibility requirements for grants, funding, and tax reliefs. This can include meeting predefined sustainability standards or demonstrating a clear commitment to environmental practices, which may require additional paperwork or documentation.
- Complex application processes: the application procedures for green financial incentives can be complex and time-consuming. Developers may face challenges in navigating bureaucratic processes or in providing the required information in a way that meets the expectations of funding bodies.
- Changing regulations: developers need to ensure that their projects comply with evolving green finance and local planning policies / environmental regulations. Developers often don’t have the time to stay up-to-date with the regulatory landscape governing these incentives, which is where the help of industry experts and legal advisors working in the field can prove invaluable.
- Competition for funds: with a growing number of developers seeking financial support for sustainable projects, competition for available grants and funding can be intense.
- Monitoring, compliance and reporting obligations: many green financial incentives come with ongoing reporting and documentation requirements to demonstrate compliance with sustainability goals. Developers may find these obligations cumbersome or challenging to fulfil.
- Partnerships and stakeholder engagement: Collaborating with various stakeholders, including local communities, environmental organisations, and government bodies, can pose legal challenges. It is important to work together but protect your interests in any partnership ventures.
Navigating these legal challenges requires careful planning, thorough understanding of applicable laws and regulations, and often the assistance of legal experts or consultants in the field of sustainable development.
How can legal advisors assist developers in optimising funding opportunities while ensuring compliance?
While the available financial incentives are promising, the complexity in identifying suitable financial incentives available, navigating the application process, and meeting compliance requirements can be daunting. This is where legal advisors play a critical role.
Here’s how we assist developers: -
- Identifying suitable opportunities: funding can be scattered, difficult to locate, and constantly evolving. With our day-to-day knowledge of working with developers and live opportunities available, legal advisors can help you secure the right funding at the right time.
- Navigating regulations: we can provide clarity on the rules and regulations governing each financial incentive, ensuring compliance with all requirements, both at the outset and ongoing compliance/reporting obligations.
- Application support: the application processes for grants and funding often require detailed proposals and financial disclosures. We can help draft robust applications that meet the necessary criteria, improving the chances of approval.
- Contractual obligations: we can help you understand terms and conditions attached to any schemes, as well assist in the drafting and negotiating of any agreements involved to protect your interests.
Summary
For property developers in the UK, embracing green development is not only a responsible choice but also a financially smart one. With an array of grants, tax reliefs, and funding options available, there are significant opportunities to enhance project viability while contributing to sustainability goals. Engaging with experienced commercial property solicitors can greatly facilitate the process of obtaining these incentives, ensuring compliance and maximising benefits.
