Green mortgages are intended to help the EU achieve its climate goals –

The EU has used portfolio standards to reduce vehicle fleet emissions. Climate policy advisors are now pushing for similar strategies to reduce emissions in buildings through “green” mortgages to finance major renovations.

On October 14th, Madrid-based consultancy Climate Strategy published a 60-page report on standards for green mortgage portfolios that, if implemented by the European Commission, would encourage homeowners and banks to work together to improve the average energy efficiency of houses to work.

The proposed portfolio standards go hand in hand with the Commission’s renovation wave that started a little over a year ago.

There are 220 million households in Europe, two-thirds of which were built before any form of energy standards existed. Buildings account for more than a third of carbon emissions in the EU and making them more efficient is an integral part of the EU’s plans to achieve net zero emissions by 2050.

The Commission plans to renovate 35 million buildings for energy purposes by 2030 at an annual rate of 3%. It is currently just over 1%.

Peter Sweatman, CEO of Climate Strategy, said new regulations are needed to carry out the major renovations needed to meet the EU’s climate targets.

“It’s about more than just replacing the boiler. It’s about renovating the house down to the last detail and making it very efficient, very comfortable and more livable, ”says Sweatman.

A major renovation can cost as much as buying a new car, but it’s not that easy to do. While the vehicle market is generally centralized, homeowners have to work with various agencies to organize and fund their renovation projects. A thorough renovation also means that you have to move out of the apartment for a longer period of time, which is associated with high costs.

This is where mortgage portfolio standards come into play – banks and mortgage companies would offer homeowners complete renovation packages.

Sweatman told EURACTIV that people with more energy-efficient homes are better protected from spikes in the energy market, which is becoming increasingly important in the current energy crisis.

“It’s about the idea of ​​taking out a loan to reduce the future cost of a home,” he said.

Climate goals: green energy with or without gas?

The goals of the Green Deal can only be achieved if the energy mix is ​​reduced in emissions through more environmentally friendly energy sources. In principle, everyone agrees on this matter. The only question is whether the fossil fuel gas actually belongs to these greener alternatives.

What do the banks get out of it?

The pressure on financial institutions to adapt their lending practices to the Paris Climate Agreement is mounting. The report explains that only 8% of leading banks’ balance sheets, which include mortgages, are currently compliant with the EU sustainable finance taxonomy.

“Many [Banken] have committed to decarbonising their activities, ”said Sweatman.

“What better way to decarbonise your mortgage portfolio than to take all of your clients’ low-energy homes and upgrade them to much better-energy homes?”

To do this, mortgage lenders must “proactively ask the question,” according to Sweatman, by gathering energy efficiency data, collecting energy certificates for customers, and approaching homeowners about renovation plans.

That sounds like a lot of work, but according to Sweatman, it will pay off for homeowners and banks alike.

“This is an opportunity for homeowners who have mortgages to take some money from the bank and put it in a more efficient home, become a better creditor, and have a lower bill.

In other words, more efficient energy means cheaper mortgages and therefore better credit for customers.

The mortgage portfolio standards also tell banks who is most at risk of falling into debt or who needs a renovation to pay their energy bills.

And those who live in energy-inefficient homes will experience the greatest benefits, according to Sweatman. The houses in the European Union are provided with energy labels on a scale from A to G. When preparing for major renovations, banks will first target the houses with the greatest potential for improvement.

Even those who cannot afford a mortgage would benefit from the new standards, he stressed.

The standards can’t magically make people bankable who don’t have access to a mortgage, ”Sweatman said. But this is exactly where national governments come in: EU member states are currently offering grants and subsidies to help citizens renovate their homes. According to the standards of the mortgage portfolio, people who can afford a loan get it, while those who cannot afford it get subsidized by their governments.

“It’s really important that we provide grants to people who just can’t afford to heat their homes – people who are at risk and vulnerable,” he said.

Enough hints

Many banks have already adopted the new standards or are introducing their own versions.

The Dutch bank ABN Amro finances over 10% of the buildings in the Netherlands. By 2030, the bank wants to help ensure that all buildings in its 185 billion euro mortgage portfolio achieve an average A rating. All ABN company properties are to be given an A rating within two years.

Homeowners get discounted mortgages when they buy homes with a registered energy label of B or higher or renovate their existing homes to this level.

ING, another Dutch bank, joined the Net-Zero Banking Alliance in August. With its Terra approach, ING aims to move each of its nine energy sectors, including residential property, to new low-carbon technologies and move away from current practices.

The UK’s central bank, the Bank of England, is on track to reduce “absolute greenhouse gas emissions” by 63% between 2016 and 2030. And Sweatman said all UK banks should have an average credit portfolio rating of C by that time.

“There is already enough evidence to suggest that this is the way to go,” said Sweatman. “If you look at the Science-Based Targets Initiative, where financial institutions are setting roadmaps for the future, the type of tools they issue could be described as mortgage portfolio standards.”

[Bearbeitet von Frédéric Simon]