Research into market appetite for Energy Efficient Mortgages

The report provides an in-depth analysis of the current state, challenges, and future opportunities for energy-efficient mortgages (EEMs) in the EU. It explores the potential benefits of EEMs for financial institutions, consumers, and the broader EU economy, aligning with the EU’s climate goals by promoting energy efficiency in building stock. The study analyses existing EEM offerings, assesses market demand, and identifies obstacles and best practices across a range of EU financial institutions.

1. **Market Overview**: EEM products are gaining traction across Europe, driven by demand from environmentally conscious investors and regulatory pressure for sustainable finance. The European Energy Efficient Mortgages Initiative (EEMI) has been instrumental in shaping the EEM market by providing guidelines, a “toolbox” for institutions, and a platform for cross-sector collaboration.

2. **Ecosystem and Value Chain Analysis**: The report highlights the importance of a comprehensive EEM ecosystem, encompassing origination, risk management, marketing, partnerships, funding, IT/data management, and technical expertise. This ecosystem would facilitate efficient and streamlined processes for both lenders and consumers, ultimately boosting EEM adoption.

3. **Consumer Demand and Awareness**: Consumer behaviour research reveals a growing interest in energy-efficient financing, with consumers more likely to invest in energy improvements due to rising climate awareness. Simplifying the customer journey, enhancing consumer education, and leveraging digital tools to inform and engage consumers are seen as critical steps.

4. **Regulatory and Funding Incentives**: Compliance with EU standards, such as the Energy Performance of Buildings Directive (EPBD), and alignment with ESG criteria are important drivers. EEMs, when structured to meet these criteria, can reduce mortgage default risks, enhance bank stability, and improve funding opportunities through green bonds and EEM-specific asset classes.

5. **Challenges and Recommendations**: 

   – **Data Access and Quality**: One major challenge for EEMs is the availability and quality of energy efficiency data, particularly the integration of reliable Energy Performance Certificate (EPC) data across EU member states. The report recommends establishing standardized, accessible data-sharing frameworks to support financial institutions in tracking energy performance and facilitating accurate risk assessment.

   – **Risk Management and Creditworthiness**: Institutions face hurdles in quantifying the financial benefits of energy efficiency within traditional risk metrics. Solutions include standardizing property valuations with energy criteria and developing credit risk models that account for energy savings.

   – **Consumer Awareness and Marketing**: To address limited consumer awareness, the report suggests national-level marketing initiatives, cross-industry partnerships, and targeted outreach to enhance demand.

6. **Case Studies and Country Analysis**: The report includes case studies from Nordic countries, Germany, and Italy, where tailored EEM frameworks have been tested. The Nordic model, for instance, demonstrates a robust digital infrastructure for EEM data collection and sharing, which enhances transparency and scalability.

7. **Future Outlook**: The report concludes with strategic recommendations, emphasizing collaboration between financial institutions, governments, and energy service companies. Future EEM initiatives should focus on increasing the EEM product offering, enhancing cross-border data standardization, and integrating digital solutions to create a seamless, cost-effective EEM market experience.