Leaders in green finance and development are working together to create a new financing framework that will support the development of low embodied carbon buildings.
Inspired by operational emissions-linked finance, the framework aims to address the often-overlooked carbon emissions within buildings in the construction phase. It will provide clear guidance on structuring and verification for lenders designing low-carbon products, and for developers hoping to access preferential finance.
The green loans sector – designed to provide discounts on loans for sustainable projects – remains niche. Joint research by Puma Property Finance and UCL reveals that only 30% of development lenders offer clear sustainable finance solutions, while 38% of developers say they need a better understanding of sustainable finance before they could consider them.
At the same time, the UK Green Building Council (UKGBC) states that embodied carbon from the construction and refurbishment of buildings currently makes up 20% of UK built environment emissions. The recently published UK Net Zero Carbon Building Standard – which sets best practice benchmarks for embodied carbon – makes it clear that developers have a critical opportunity to reduce these emissions by choosing recycled and bio-based materials, such as timber.
For example, Paradise SE11 in London uses a cross-laminated timber structure that will lock away nearly 1,900 CO2e for 60 years, resulting in embodied carbon emissions 35% lower than Royal Institute of British Architects (RIBA) 2030 targets.
As regulations on whole-life carbon come into force, there is a clear market for lenders to tap – supporting the growing appetite from clients to deliver future-proofed projects and greening their loan books in the process.
Funded by bio-based built environment network Built by Nature, and led by carbon measurement company Construction Carbon, the proposed framework will build on the Loan Market Association’s existing green loan principles and other voluntary standards and is expected to include technical guidance and best practice examples.
Products such as Ingenious’ low-carbon facility, Carbon Impact – which incentivises eligible developers to meet embodied carbon targets by offering a rebate on the exit fee of up to 1% of the total loan amount – will be considered as templates in the guidance.
It is expected to launch for consultation in March 2026. Construction Carbon welcomes input and insights from interested parties.
Gilbert Lennox-King, Construction Carbon: “Lenders and developers both have a role to play in tackling embodied emissions, but historically there has been a disconnect between them. Our proposed framework will bring both parties together to address their unique challenges through a shared lens, making it easier both to drive real action on embodied carbon and realise the many value creation and resilience benefits of low-carbon development.”
Tom Brown, Ingenious Real Estate: “One of the biggest challenges in today’s market is a common understanding between lender and developer of the typical structure and format of a low carbon loan. Reducing embodied carbon from construction and development remains a significant challenge for the industry. We recognise that a multi-agency/stakeholder response is required if the UK is going to get close to its net zero targets, and we hope the new framework will support funders who are taking a proactive approach to embodied carbon.”
Anna Lisa McSweeney, UK Network Lead at Built by Nature: "We’re proud to support this initiative, which strongly aligns with our mission to accelerate the responsible use of timber and biobased materials. For these materials to scale, they must be seen as not only sustainable, but also attractive and commercially viable. This new framework is key to strengthen the business case for low embodied carbon buildings and help lenders offer preferential finance to developers tackling embodied emissions. By unlocking investment, we’re driving a global shift in how buildings are designed and financed - for the benefit of climate, nature, and people."