The Home Energy Model replaces the current RdSAP methodology from the second half of 2027, introducing four separate metrics in place of the familiar A-G rating. For ESG and climate teams at UK mortgage lenders, the shift creates a disclosure challenge that goes beyond property compliance. Portfolios that look a certain way under RdSAP may look materially different under HEM, and most lenders are not yet accounting for what that means for the data they hold today.
For ESG and climate teams at UK mortgage lenders, the Energy Performance Certificate has long been the primary unit of measurement for property-level sustainability risk. It anchors financed emissions calculations, informs transition risk modelling, and underpins TCFD and ISSB disclosures. From the second half of 2027, that unit of measurement is changing fundamentally and most lenders are not yet accounting for what that means for the data they hold today.
The government confirmed in March 2026 that the Home Energy Model will replace the current SAP and RdSAP calculation methodology used for EPCs in England and Wales, with the revised launch date now set for the second half of 2027.
The familiar single A-G rating will be replaced by four separate metrics: Fabric Performance, Heating System, Smart Readiness, and Energy Cost.
For MEES compliance, two of those metrics determine whether a property meets the standard. Fabric Performance is mandatory and landlords must then meet either the Heating System or Smart Readiness threshold.
The implications of the Heating System metric are significant. Under HEM, no property with a solely fossil-fuel heating system can achieve a C or higher on that metric, regardless of how efficient the boiler is. Properties currently rated C under RdSAP may score differently under the new four-metric framework because the methodology is fundamentally different.
The disclosure problem this creates
For ESG teams, the methodological shift creates a disclosure challenge that goes beyond property compliance.
Current financed emissions calculations, transition risk models, and net zero pathway reporting are built on RdSAP-derived EPC data. When HEM launches, that data will no longer reflect the methodology regulators and investors are using to assess property energy performance. A portfolio that looks a certain way under RdSAP may look materially different under HEM, particularly any back book with significant exposure to gas-heated properties, which cannot achieve Heating System Band C regardless of the fabric improvements already made.
The transition period runs from the second half of 2027 to at least October 2029, during which both old and new format EPCs will be in circulation simultaneously. For ESG teams responsible for annual report disclosures, that creates a period of methodological inconsistency that will need careful handling and clear documentation of assumptions.
Why acting before 2027 matters for reporting
There is a reporting advantage to properties achieving RdSAP compliance before HEM launches. An EPC C obtained under current RdSAP rules before the second half of 2027 will be valid for ten years, meaning the property is considered compliant through the 2030 deadline even after HEM is live. For lenders modelling their net zero pathways, properties that achieve compliance under the current methodology provide a degree of certainty that properties still awaiting assessment under HEM do not.
Cotality has been working directly with the HEM consultation process, positioning itself as a key technical partner in the transition and its Net Zero Hub models portfolio exposure under both the current RdSAP methodology and the incoming HEM framework, giving ESG teams a forward-looking view of how their financed emissions calculations and transition risk disclosures are likely to shift when the new system goes live. Rather than discovering the impact of HEM at the point of disclosure, lenders can model it now and build the methodological documentation that regulators and auditors will expect.
The question worth asking now
How much of your back book is currently rated C under RdSAP but at risk of dropping below C under HEM's four-metric framework? And how many properties in your portfolio have gas heating systems that will be unable to achieve Heating System Band C without significant capital investment?
Without property-level data, those questions cannot be answered. For ESG teams whose disclosures depend on being able to answer them, that is a material gap.
