Mitie Partners With SDCL To Tackle Funding Barriers For Net Zero Buildings
On October 14th, UK facilities management services firm Mitie announced a partnership with Sustainable Development Capital LLP (SDCL), an investment firm focused on energy efficiency and decentralized generation. Through the partnership, Mitie and SDCL will help firms fund and manage major decarbonization projects such as on-site generation or heating system upgrades. SDCL will provide capital to fund project installation, while maintaining long-term ownership of assets through an energy services agreement. Mitie will leverage its engineering and energy management capabilities to help clients procure, install and maintain decarbonization programmes.
The combined Mitie-SDCL proposition aims to help firms overcome the key barrier to decarbonization projects: poor access to capital. While finance directors will typically fund rapid payback projects, they tend not to invest in projects when paybacks extend over multiple years. This has been a significant barrier for firms rolling out transformational decarbonization projects such as CHP or on-site solar that take at least five years to pay back. The availability of third-party financing can help ease the internal barriers, particularly for capital-constrained firms or those with a demanding hurdle rate.
Historically public sector organizations have led the uptake of third-party funded energy services contracts in the UK. This sector typically owns its buildings, enabling it to take a long-term view of its estate and sign off multi-year energy efficiency contracts. In addition, standardized public sector procurement frameworks such as the Carbon and Energy Fund and RE:FIT have streamlined the vendor selection and contracting processes. In the private sector, uptake of funded energy service contracts is still emerging, led by firms that own their real estate and are highly engaged in the energy efficiency agenda.
The Mitie-SDCL offering is well placed to tap into the surging interest in decarbonization, with 71% of the FTSE 100 having a net zero target and the upcoming COP26 driving new visibility. While many global firms are still making claims of carbon neutrality using offsets and unbundled renewable energy certificates (RECs), our smart building survey shows growing appetite amongst firms for making building-level upgrades. Across our UK-based respondents, 26% of firms are investing in on-site power projects and 13% are replacing gas boilers with non-fossil fuelled solutions.
For more insights on updating your energy management programme, read our recent report Best Practices: Planning For Net Zero Carbon Buildings.