Banks can play a game changing role in providing long-term financing for energy improvements to the European building stock. They intervene at the most critical moment, when a property is built or bought and therefore have a unique opportunity to support the improvement of the quality and energy performance of buildings, both new and existing, whilst at the same time helping to potentially free-up disposable income through lower energy bills, enhance property value and, as a result, reduce credit risk for borrowers, lenders and investors.
As the EeMAP Report providing a review of the state of play of building performance indicators (one of a series of four) describes, the building and construction sector has come a long way in its understanding of what constitutes an energy efficient and environmentally sustainable building and the value this delivers for owners and occupiers, and a wide-range of tools and assessment frameworks exist to evaluate building performance. However, in many cases, the energy and environmental performance of buildings are not accounted for in credit risk assessments, signalling a disconnect between the buildings and financial sectors in this respect. This is especially true of the residential housing market, where mortgage affordability and valuation practices largely ignore these important issues. On the funding side of the mortgage business, impressive progress is being made in bond markets with considerable increases in green – covered – bond issuance, however the scale needed to play a significant role in the transition to a low-carbon economy has yet to be reached.