The term ‘productive finance’ has gained traction among institutional investors. How do you define it?

Productive finance is about putting long-term capital to work in projects that drive sustainable economic growth and create tangible societal outcomes, not just short-term financial returns. In practice, it means investing in sectors such as infrastructure and real estate that enhance productive capacity, accelerate the transition to net zero, and deliver diversified, risk-adjusted performance. It also creates a compounding effect: investors gain stable, inflation-linked returns, while communities benefit from improved infrastructure, job creation and better amenities.

Why is real estate — and real estate debt — so effective for this kind of investment?

Real estate underpins economic activity at every level. It provides homes, workplaces and the framework of communities. Debt financing allows capital to be deployed efficiently and at scale while maintaining predictable income streams and downside protection. The most sustainable opportunity lies in transforming the existing built environment. The UK has the oldest building stock in Europe, and more than 270,000 homes in England are long-term empty. Given that the sector is also responsible for a 25% share of national greenhouse gas emissions, that represents both an economic inefficiency and an environmental challenge. By financing the refurbishment and redevelopment of underused assets and brownfield land, investors can help meet housing demand, reduce emissions and stimulate regional growth — while generating attractive returns.

Development-stage lending carries distinct risks. How does it deliver additionality?

Additionality means enabling outcomes that wouldn’t otherwise happen. Traditional lenders are often constrained by regulation and risk appetite, especially when assets aren’t yet income-producing. Private capital can fill that gap, providing liquidity during the pre-development phase to fund planning, remediation or  works. That early support de-risks later stages and brings regeneration projects to life. It’s capital acting as a catalyst, not just a financier.

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What wider impact can this kind of financing create?

The regenerative effect is significant. Converting obsolete assets or bringing brownfield sites back into use revitalises local economies, improves infrastructure and attracts investment. Every 100 new homes built can generate more than 300 jobs across construction and the supply chain, support apprenticeships and inject around £1.2m into local household spending. The benefits extend far beyond housing delivery, strengthening economic resilience and supporting inclusive growth.

What makes this attractive for institutional investors?

Transitional real estate debt offers exposure to tangible assets and the real economy, with contractual cashflows and security through collateral. It also aligns portfolios with policy priorities around regeneration, sustainability and productivity: areas increasingly emphasised by regulators and asset owners. It’s a way to deploy capital into projects that are commercially sound, socially valuable and structurally underserved by traditional lenders.

How can productive finance support the UK’s decarbonisation goals?

Retrofitting and repurposing buildings, rather than demolishing and rebuilding, can cut carbon emissions by up to 75%. The Greener Homes Alliance, a £150m partnership between Octopus Capital and Homes England, is a strong example. Its first phase supported more than 550 homes over 40% with an EPC rating of A and all exceeding a SAP score of 86, well above the national average. These projects prove that sustainability and financial performance increasingly go hand in hand.

ESG factors now influence valuation and risk. How is this reflected in the market?

Energy-efficient and ESG-compliant assets tend to outperform on both income and capital value. They achieve higher occupancy, command premium rents and face lower obsolescence risk. Technology is amplifying that advantage. Through Octopus Energy’s Zero Bills initiative, residents in new and retrofitted homes can eliminate energy costs for up to ten years via on-site renewables and smart systems. For investors, these assets combine long-term environmental alignment with yield stability and regulatory resilience.

Looking ahead, what role will real estate debt play in productive finance?

Real estate debt is a key enabler of productive finance. It channels patient capital into projects that deliver measurable economic, social and environmental outcomes. By bridging the early-stage funding gap and supporting the transition to a low-carbon built environment, it achieves genuine additionality. For institutional investors, it offers a disciplined way to achieve both performance and impact, mobilising capital not just to preserve value but to create it.