External wall insulation is one of the methods that could be used to decrease the heating and cooling demand of a building, which is vital for reducing overall energy consumption and carbon emissions. However, it has also been observed that walls that were externally insulated experience high levels of algal growth over a short period of time. Although the actual impact on health and structural integrity is limited, this perceived aesthetic deterioration could reduce people’s confidence in external wall insulation, which might be an obstacle against the reduction of energy demand. This paper focuses on the impact of external wall insulation on the algal growth in the UK. This is done by simulating the hygrothermal performance of different test walls and estimating the annual algal growth using an algal growth model. The results show that increasing the thermal resistance of a building’s exterior can have a significant impact on the growth of algae. This is mainly caused by the increase in surface condensation due to a reduction in surface temperature for externally insulated buildings. Areas with high wind-driven rain exposure appear most susceptible to algal growth, and the application of EWI may amplify these risks if drying potentials are insufficient. The study also explores the use of mineral renders and reduced insulation thickness as practical strategies to mitigate the risk of algal growth. It concludes that appropriate render compositions and careful selection of insulation thickness can have a positive effect in reducing the risk of algal growth.