This page aims to provide a roadmap to assist the planned Energy Efficient Mortgages Initiative (bringing together EeMAP & EeDaPP) Pilot Scheme. In doing so, the following sections introduces the Pilot Scheme Implementation Guidelines, which framework will underpin the Pilot Scheme, and describes the scope of the Pilot Scheme as well as its key objectives and the steps which lending institutions or other actors who are interested in participating in the Pilot Scheme should undertake.
Lending institutions interested in participating in the Pilot Scheme are kindly invited to signal this by email to the Energy Efficient Mortgages Initiative Coordinator, Luca Bertalot Secretary General of the EMF-ECBC, on lbertalot@hypo.org
The Energy Efficient Mortgages Initiative aims to design an optimal cost-effective value chain and ultimately to analyse the feasibility of an “energy efficient mortgage”, according to which building owners would be incentivised to improve the energy efficiency of their buildings or acquire an already energy efficient property by way of favourable financing conditions linked to the mortgage. The ability of lending institutions to offer incentives linked to the mortgage (e.g. reduced interest rates and/or increased loan amount) reflects the reduced credit risk of these loans.
In preparing the Pilot Scheme, the EeMAP Consortium has consulted widely across the finance, building performance and valuation sectors to draft a robust set of guidelines which are intended to support lending institutions whilst testing the energy efficient mortgage framework internally. The consultation on these guidelines has been underpinned by a series of national roundtables aimed at exchanging views and fine-tuning the guidelines with all relevant stakeholders.
To recall, the guidelines consist of three elements which reflect the three pillars of the energy efficient mortgage framework:
- Implementation Guidelines for Lending Institutions
- Building Performance Assessment Criteria
- Valuation and Energy Efficiency Checklist
The framework and therefore guidelines are intended to be valid for new and existing residential [single family & multi-family] and commercial properties.
Under the Pilot Scheme, any lending institution will have the opportunity to voluntarily implement the draft Pilot Scheme framework and analyse the feasibility of launching an energy efficient mortgage product. The key objectives are:
- to test this framework in operation – in order to improve and strengthen it
- to gather data on the performance of energy efficient mortgages
In parallel to this process, during the Pilot Scheme, lending institutions are encouraged to identify and tag existing mortgages that already meet the requirements laid down in the guidelines. Existing data for these mortgages should be recorded as per the guidelines and shared with the EeMAP Coordinator, the EMF-ECBC, for the purposes of analysing the impact of energy efficiency on risk. The purpose of this exercise is to build a preliminary proxy dataset which could support lobbying action to achieve to a realignment of capital requirements to reflect a potential lower risk profile.
Any new mortgages originated in line with EeMAP Pilot Scheme Framework should also be tagged as “energy efficient mortgages” within lending institutions’ IT-systems and the same data collection exercise for existing mortgages should be conducted for these loans with a view to analysing the impact of energy efficiency on risk.
The data collection exercise for lending institutions participating in the Pilot Scheme will be facilitated by a future standardised IT protocol, which is currently being developed through the EeDaPP Initiative, aimed at designing and delivering energy efficient data collection, processing and disclosure capabilities. With a view to optimising efficiency in the value chain, lending institutions participating in the pilot scheme are encouraged to liaise directly with EeDaPP consortium members (TXS, European Datawarehouse, Hypoport & CRIF) in order to reduce costs as much as possible and maximise already existing IT and commercial solutions and relationships.
Specifically, the EeDaPP Initiative will seek to:
- Identify and define standardised reporting criteria which will serve as the basis upon which data linking related to energy efficient mortgages is gathered.
- Design a standardised approach to granular technical and financial mortgage data gathering in the form of an energy efficiency data protocol with an underlying data reporting template.
- Design a central common dynamic data portal through which large-scale present-data energy efficiency data will be collected and disclosed.
The protocol is intended to be dynamic as well as static and to be integrated into existing data repositories, and then made available through a centralised data portal. In this respect, it will not increase the burden for banks who will simply deliver additional data to their existing data repository.
The required data will be uploaded and validated on a local basis in the portal, which will also allow for the recording of relevant national peculiarities. Banks will be able to upload the information either directly or via designated third parties (data providers).
In order to serve during the Pilot Scheme, the EeDaPP Consortium will seek to deliver a first draft protocol, including a data reporting template, in time for the launch in June.
- to build and strengthen the value-chain of actors delivering energy efficient mortgages in key markets
The Energy Efficient Mortgages Initiative will deliver a framework to support the origination of the energy efficient mortgage product by lending institutions, consisting of guidance from building energy efficiency experts and a toolkit from property valuers. The Pilot Scheme therefore also provides the opportunity to build and strengthen relationships with these actors, and potentially a broader chain of other relevant actors e.g. utilities, on the basis of the relevant guidance/toolkit from each.
For example, lending institutions are encouraged to use/communicate to energy auditors/experts the building performance assessment criteria outlined in the guidelines for the purposes of measuring the energy efficiency of a new property or of an existing property both pre- and post- renovation. Furthermore, lending institutions are also encouraged to communicate the valuation and energy efficiency checklist to the property valuers they typically work with, whether internal or external, for the purposes of the valuation of property.
The Pilot Scheme will be underpinned by a governance structure to assess, support and advise, as relevant, on the interpretation, analysis and potential implementation of the energy efficient mortgage framework:
- EeMAP Institutional Advisory Council
The main role of this Group will be to coordinate institutional support to ensure a ‘sandbox’ or ‘laboratory’ for lending institutions participating in the pilot scheme. The Institutional Support Group will act in an advisory role to participating lending institutions, providing advice and recommendations on already existing support schemes in order to maximise the impact of implementing energy efficient mortgages into existing products lines. In turn, the Institutional Support Group will support the deployment of the Pilot Scheme in the market and suggest improvements/adjustments where necessary.
The Institutional Support Group will be composed of representatives from the European Commission, European Investment Bank, European Investment Fund, European Bank for Reconstruction and Development; World Bank UNEP FI and International Finance Corporation, supported by the EeMAP Consortium Partners.
- EeMAP Task Force within Lending Institutions
In order to facilitate effective and coordinated implementation process between Pilot Scheme participants, the EeMAP Consortium and the Institutional Support Group, each lending institution participating in the Pilot Scheme is advised to set up an EeMAP Task Force.
The EeMAP Task Force should assess the feasibility of implementing the energy efficient mortgage framework within existing product lines and processes, and later oversee and manage its implementation. In order to facilitate and ensure a coordinated approach across departments, the Task Force should be composed of representatives from the funding, risk management and retail departments, for example.
- EeMAP National Coordinator
In order to facilitate and centralise coordination at national level, national banking or mortgage associations should play a role as a hub/centre of expertise for questions from internal contact groups within lending institutions on all issues related to the framework. In this way, questions can be collected centrally and escalated to the EeMAP Consortium, and the subsequent answers shared with the internal contact group of lending institutions the benefit of all participating lending institutions.
- Review Process
The guidelines will be reviewed and updated at appropriate intervals during the pilot scheme based on feedback received, ensuring that the energy efficient mortgage framework is as robust and relevant as possible, and reflects the state of the market.
In order to participate in the Pilot Scheme, lending institutions are encouraged to follow these 6 steps:
- Step 1
Set up an EeMAP Task Force with representation from across departments and share contact details with the EeMAP Consortium Coordinator, the EMF-ECBC. The EMF Task Force should also liaise with the EeMAP Institutional Support Group.
- Step 2
Assess how the energy efficiency mortgage framework can be implemented into existing product lines and processes using the Pilot Scheme Framework, with a view to originating the product in due course, and report progress back to the EeMAP Consortium.
- Step 3
Provide feedback and advice on the Pilot Scheme Framework in order to facilitate improvement and/or amendment, where necessary, to ensure an appropriate and product and framework.
- Step 4
Identify which existing mortgages already meet the requirements put forward in the Pilot Scheme Framework and tag those as energy efficient mortgages.
- Step 5
Record data relating to the new and existing energy efficient mortgages. This data should be shared with the EeMAP Consortium Coordinator, the EMF-ECBC for analysis purposes.
- Step 6
Signal compliance with the EeMAP Framework, on a self-certification basis and as relevant, to the EeMAP Consortium in the event of the offering of an energy efficient mortgage product to the market.
