Episode 156 - Retrofit Credits

This week we will be talking about Retrofit Credits. This episode content meets PC3 - Legal Framework & Processes of the Part 3 Criteria.

Resources from today's episode:

Websites:

• https://hact.org.uk/retrofit-credits/
• https://hact.org.uk/tools-services/social-value-insight/

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Transcript

Episode 156:

Hello and Welcome to the Part3 with me podcast. 

The show that helps part 3 students jump-start into their careers as qualified architects and also provides refresher episodes for practising architects. I am your host Maria Skoutari and this week we will be talking about Retrofit Credits. Todays episode meets PC3 of the Part 3 Criteria.

With the UK’s targets to achieve net zero carbon emissions by 2050, retrofitting existing buildings has become of upmost importance. Which is where Retrofit credits come in.

Retrofit credits have been developed by the social housing charity HACT and PNZ Carbon and have been trialled on retrofit schemes since 2022. HACT and PNZ manage the sale of the Retrofit Credits.

Now looking at what Retrofit Credits are:

Retrofit Credits is a new carbon credits scheme that unlocks investment in social housing retrofit by verifying the emission reductions and social value of retrofit projects, designed to finance and accelerate the decarbonisation of social housing in the UK. It centres the impact of these retrofit activities on residents and communities by incorporating social value metrics so that the funding unlocked through carbon credits doesn’t just reduce carbon but also improves lives. Monetised credits can be earned from retrofit projects that housing associations are already planning, or would like to carry out, and can be calculated pre-works to inform the investment case for the project. Not only does this scheme unlock fresh opportunities to finance retrofits, but it also prioritises social value, offering local organisations a way to invest directly in their community's environmental future. 

The aim of the Retrofit Credits scheme is to support and accelerate the sector’s contribution to the UK’s net zero carbon 2050 target and is described as a world-first for originating carbon credits from the decarbonisation of existing housing stock.

The general key features and benefits of Retrofit Credits includes:

• The fact that they are registered with the Verified Carbon Standard, the worlds most widely recognised greenhouse gas crediting program and is only the second accredited Verified Carbon Standard accredited programme in the UK and a world first for the built environment. By adhering to the Verified Carbon Standard, Retrofit Credits ensure that the carbon reductions achieved are credible and quantifiable, providing confidence to both housing providers and investors.
• It is guaranteed that they have been developed based on quality, integrity and locality. 
• Retrofit Credits aim to be locally sourced from social housing projects that not only include sustainability goals but also measurable social value outcomes that impact communities across the UK. 
• Combine measurable environmental outcomes with tangible social impacts, making it unique compared to traditional carbon credit schemes.
• Encourages local businesses and organisations to offset emissions by investing in their communities.
• Housing providers can choose buyers who align with their goals, fostering long-term partnerships

If you are a provider, Retrofit Credits provide them with:

• The opportunity of getting additional, long-term funding for their retrofit projects
• Assists them to understand the social value generated by their retrofit projects
• Increases the social impact for residents and the local community
• Contributes to their sustainability goals
• Built on an ethical framework

If you are a buyer, Retrofit Credits provide them with:

• The opportunity to offset their carbon emissions and work towards their environmental goals
• Contribute to their sustainability goals
• Contribute to their social value impact across the UK
• Built on an ethical framework
• Build into their long-term decarbonisation strategy

If you are a resident, Retrofit Credits provide them with:

• Healthier living environments with reduced dampness and cold-related issues.
• Lower energy bills and increased comfort

So how does the Credits process work, what are the steps to be followed:

Essentially, each Retrofit Credit represents a measurable reduction in carbon emissions that results from energy efficiency improvements made to social housing properties. Such as upgraded insulation, double-glazed windows, and efficient heating systems. 

1. In terms of the process, firstly, the social housing provider enrols housing stock where retrofit works could improve the thermal efficiency of the home and/or reduce the carbon intensity of the heating source.
2. Then, PNZ Carbon calculates the potential emission reductions using the Verified Carbon Standard and projected funding available from Retrofit Credits ensuring credibility and transparency. The Verified Carbon Standard Program requires ongoing monitoring and verification of projects, ensuring the permanence and continued environmental integrity of the Retrofit Credits.
3. HACT then calculates the social value generated by the retrofit works using the UK Social Value Bank. Providing healthier homes, reduced energy bills, enhanced comfort, and better overall wellbeing for residents.
4. The social housing provider then uses the projected funding to inform their investment case for retrofit activities.
5. Once retrofit works are complete, Arctica originates the Retrofit Credits with the Verra Registry backed by the certified emission reductions. Verra is the worlds most widely used greenhouse gas crediting program, providing a rigorous standard for verifying emission reductions. This ensures the uniqueness and integrity of the credits issued. 
6. Then, as mentioned, PNZ Carbon and HACT manage the sale of the Retrofit Credits which are typically sold to businesses.
7. And the social housing provider then receives payment for the emission reductions and social value created or uses the Retrofit Credits to compensate their unabated emissions. Any revenue made from the credit sales is reinvested into further retrofit projects, creating a continuous cycle of improvement for housing providers and residents.

So let’s have a closer look at one of the key and most important elements of the process, social value. Social value outcomes can be grouped into seven key areas:

• Employment
• Local environment
• Supply chain
• Youth
• Construction
• Homelessness
• Environment

Each outcome demonstrates the social value to individuals, the savings to the state and the local business. It has been designed for the built environment and supply chain so they can fully demonstrate the transformational impact to people and local communities in which they operate.

I mentioned that part of calculating the Credits involves HACT calculating the social value generated by the retrofit works. For this, HACT use their UK Social Value Bank which was developed with the sector for the sector and is the largest bank of methodologically consistent social value metrics in the world. 

The UK Value Bank contains a suite of 88 outcomes. Each outcome has a defined financial metric, which incorporates a wellbeing value, a health top up value and, where applicable, an Exchequer value. The Bank builds on person centred principles, using data on self-reported wellbeing and life circumstances measuring people’s actual experiences. This means that the values for each outcome are based on how they impact people’s lives as they live them. Retrofit Credits use the Bank’s methodology to calculate and monetise social value in the form of tradable credits, an approach which is fully compliant with the Treasury’s Green Book guidance on appraising programmes and projects. This aspect helps differentiate Retrofit Credits from other carbon trading schemes that may focus purely on environmental metrics, ignoring the lived experiences of those affected.

Now circling back to the social value element, social value is a measurement of the benefits that your services and programmes bring to people and communities. The social value created through these retrofits can be transformational, contributing to improved physical and mental well-being, reduced energy bills, and even greater social cohesion. Social value can be aggregated to measure the impact of energy efficiency programmes at neighbourhood, place and national levels. It is seen to make Retrofit Credits more attractive to some purchaser organisations, particularly at the local level, because they will be able to see the benefits realised in their local community. The virtuous cycle created by this funding model ensures that money stays within the community and supports tangible environmental and social outcomes.

Now, with the introduction of the Procurement Act 2023, which came into force in February 2025, public sector clients will be required to consider the public benefit of their projects as part of the procurement process. Social value measurement is therefore set to become a feature of housing association procurement. The establishment of this credit scheme can help to provide a ready-made mechanism to achieve social value for projects.

To promote this, the HACT website provides a platform, the Social Value Insight which can be used to calculate and measure social value and see the full impact of a proposal. The platform provides support in evidencing social value, monitoring the social value created through procurement or if searching to improve community investment services. Users can simply set up their projects, choose the outcomes and set targets and a budget for each. This enables users to model, monitor and measure their projects in one place and export reports of the information. 

Alongside working with the Procurement Act, the Credit scheme is also envisioned to work with the new UK Net Zero Carbon Buildings Standard although through different mechanisms:

Retrofit Credits are envisioned to provide financial incentives for retrofit projects by monetising verified emission reductions and social value impacts, offering a funding stream for social housing providers to undertake energy efficiency improvements. Whereas, the UK Net Zero Carbon Buildings Standard offers a comprehensive framework for assessing and verifying the net-zero carbon status of buildings, applicable to both new constructions and retrofits. It is therefore envisioned that integrating Retrofit Credits within projects adhering to the UK Net Zero Carbon Buildings Standard will enhance the financial viability of achieving the Standard's energy and carbon performance targets. By participating in the Retrofit Credits programme, housing providers can secure additional funding to support retrofit initiatives that comply with the UK Net Zero Carbon Buildings Standard, thereby accelerating the transition to a net-zero carbon built environment.

Retrofit Credits represent a groundbreaking approach to addressing climate change while improving lives, making them a model for sustainable development in the housing sector.

To sum up what I discussed today:

• Retrofit Credits, developed by the social housing charity HACT and PNZ Carbon, are a new carbon credit scheme aimed at financing and accelerating the decarbonisation of social housing in the UK. They provide funding for energy efficiency improvements while also measuring social value impact on communities.
• The scheme adheres to the Verified Carbon Standard, ensuring credibility in emission reductions. It is the first accredited program of its kind for the built environment in the UK.
• These credits are sold to businesses or organisations looking to offset their emissions while supporting community-focused projects.
• Beyond environmental impact, the scheme measures social benefits using the UK Social Value Bank, which is the largest bank of methodologically consistent social value metrics in the world. 
• To further promote buyers and providers to use Retrofit credits, the HACT website provides a platform, the Social Value Insight which can be used to calculate and measure social value and see the full impact of a proposal.
• Retrofit Credits support the UK’s net zero carbon 2050 target, align with the Procurement Act 2023, and complement the UK Net Zero Carbon Buildings Standard, providing financial incentives for achieving sustainability goals.