Could the ‘Energy Efficiency Mortgage’ solve Europe’s green building challenge?

Energy and building sector professionals from across Europe have united to forge a ground-breaking new initiative which offers better borrowing rates on mortgages for homebuyers that commit to purchasing more energy-efficient homes or carrying out energy-saving retrofits within properties.


Pioneered by businesses, banks, utility providers and various other groups involved in the building and energy sectors, the new European Energy Efficiency Mortgage was launched yesterday (20 September) at the World Green Building Council’s ‘Build Upon’ summit in Madrid.

Added value

The scheme effectively creates a “pan-European mortgage financing system” in order to make energy efficiency measures more accessible and affordable for home-buyers.

For banks and investors, the Mortgage could allow for loans which represent a lower risk on the balance sheet and could therefore qualify for a better capital treatment. It could also ensure that banks are able to recognise ‘energy-efficient’ assets in their risk-profiling, which would begin to help the market to price-in the added value of energy-efficient real estate. 

The project is led by the by the European Mortgage Federation – European Covered Bond Council (EMF-ECBC) with project partners including the European Regional Network of Green Building Councils, E.ON, and SAFE Goethe University Frankfurt.

Commenting on the scheme, Emmanuel Normant, vice-president for sustainable development at Saint-Gobain – which is on the project’s energy efficiency committee – said: “As we need to speed up progress to meet our climate ambition, Saint-Gobain welcomes this timely initiative which has the potential to accelerate the uptake of renovation in Europe.

“Forging a common understanding of the value of energy efficiency between all players and private banks is an essential step to unlock investment in energy efficiency.”

Paris and beyond

Offering a private financing mechanism to encourage energy efficiency improvements for households could prove crucial in helping the EU to meet its energy-saving target of 20% by 2020, according to the World Green Building Council (WGBC).

With buildings responsible for around 40% of the total energy consumption and 36% of CO2 emissions within the EU, WGBC says an improvement of the energy efficiency of buildings across the continent could lead to a 5-6% reduction of total energy consumption and a cut of 5% CO2 emissions.

Europe regional director for WGBC James Drinkwater said: “The Paris Agreement has set a course to keeping global warming to within 2C, but we will need to develop innovative ways of financing energy efficiency in Europe’s homes if we are to stand any chance of meeting that goal.

“Mortgages which reward consumers and investors by recognising energy efficiency represent one such way, and will undoubtedly play a key role in helping to achieve our ambitious climate change targets.”

Investor interest in climate finance and private sector investment required to fund low carbon initiatives will be a major focus of the COP22 climate change conference, which takes place in Marrakech, Morocco, in November.

Alex Baldwin

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