Changeworks received funding from the Scottish Research Alliance for Energy Homes and Livelihoods to investigate how social landlords in Scotland are incorporating the wider social and health benefits (or ‘co-benefits’) of energy efficient housing retrofit into asset management and investment decisions.
Background
The research sits within a shifting regulatory context, with social landlords facing increasing pressures to reduce carbon emissions, mitigate fuel poverty and ensure their properties support tenant wellbeing.
Retrofitting housing stock to be energy-efficient and low-carbon is central to these goals, however it remains unclear how wider non-financial outcomes influence planning and delivery.
This study combined an evidence review, appraisal of statutory and policy obligations, and qualitative research through interviews and focus groups with housing associations and local authorities.
Our findings
The wider evidence base on this topic was found to be limited. Existing studies show that asset management and retrofit decisions remain primarily guided by financial and compliance requirements or pressures, rather than wider social or health outcomes.
While many organisations express an awareness of the co-benefits of retrofit, these are rarely translated into performance indicators or measurable investment criteria.
Business planning processes currently integrate references to net zero within five-year and 30-year financial frameworks, but this integration is predominantly optional and few clear methods exist for valuing non-energy benefits in financial terms.
There is little evidence that cost savings from retrofit, avoided future expenditure, or improved asset values are routinely included in formal financial appraisals.
Gaps, constraints and uncertainty
The research identified structural and systemic reasons for this lack of inclusion.
Regulation embeds non-energy outcomes, such as health or wellbeing, in a limited fashion in the Scottish Housing Quality Standard.
Uncertainty, particularly the pause of Energy Efficiency Standard in Social Housing 2 and delays to the Social Housing Net Zero Standard, reduces confidence to plan long-term investments.
Positively, responses to new regulations on damp and mould are expected to demonstrate the sector’s capacity to act when clear statutory requirements and data obligations are in place.
There is an absence of standardised, practical methods to assess or value co-benefits for integration into financial modelling or option appraisal.
Without agreed metrics or valuation approaches, landlords cannot translate social or health outcomes into the formats required for business planning or board-level decisions.
Significant data and monitoring gaps prevent landlords from evidencing the wider benefits of retrofit or linking them to stock investment decisions.
This includes limited indoor environmental quality data, minimal health or wellbeing indicators, and limited integration between asset systems and tenant insights.
Organisational capacity constraints were consistently highlighted. Competing statutory duties, resourcing pressures and operational demands mean that activities not mandated in regulation, including co-benefit assessment, are deprioritised even where appetite exists.
Decision-making authority on sustainability lies largely with senior leadership and competing priorities often lead to the de-prioritisation of climate and retrofit targets without stronger regulatory drivers in place.
Financial planning constraints restrict the integration of retrofit related costs and benefits. A range of sources suggests that landlords may treat future retrofit costs as a risk rather than a planned investment need, because including them in five-year projections could threaten solvency assessments or breach lender covenants.
In turn, a lack of data and methodologies to quantify and integrate the benefits equally limits their inclusion. Although Environmental, Social and Governance (ESG) and corporate sustainability frameworks offer avenues to embed non-financial outcomes in decision-making, they do not appear to be shaping investment strategy.
As this is a rapidly evolving area, Changeworks is seeking feedback from the sector on the consultant draft of the report. Please contact Dr Ian Cochran via the form below if you have any questions or comments you would like to share.
Co-benefits of net zero retrofit and stock investment management: Social landlords in Scotland
What’s next?
This research suggests that the key barrier to integrating retrofit co-benefits into decision making is not lack of awareness, but the absence of regulatory, methodological, financial and data mechanisms to support their incorporation. Enabling meaningful integration will require progress across four areas:
- Clearer regulatory and policy expectations linked to long-term standards;
- Standardised methodologies for assessing and valuing nonfinancial outcomes;
- Improved monitoring and data infrastructure capable of evidencing health, wellbeing and social indicators; and
- Organisational capacity and support to integrate these approaches into business and asset planning
Without these changes, co-benefits are likely to remain peripheral to investment decision making in the social housing sector, despite being conceptually well understood and empirically robust.
