Finnish national roundtable on EeMAP in Helsinki- 20/12/17

20/12/17 Finnish national roundtable on EeMAP, convened by GBC Finland

This meeting in Helsinki brought together stakeholders from the Finnish banking, construction, valuation and engineering sectors with a strong interest in building energy efficiency and its financing. The Green Building Council of Finland presented an early draft of its EeMAP Finnish market brief, due to be published in January 2018. The roundtable was an opportunity to discuss market readiness and begin to form the strategic partnerships that will be necessary for piloting energy efficient mortgages in Finland.

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Why Retail Banks should get involved in the EeMAP Initiative?

By Miguel Garcia de Eulate, Head of Capital Markets, Caja Rural de Navarra

One can be forgiven for embracing a pessimistic view on the future of retail banking: low margins, huge adaptation costs to digitalisation, and new regulatory burdens are constantly – and rightly – mentioned as the biggest challenges for the industry.

However, what if retail banks could reinvent themselves as, well, retail banks, committed precisely to the very needs of their client base? What if new sources of revenue do exist, and the role of banks is to effectively channel savings to finance long-term financing needs, helping to overcome social and intergenerational gaps?

What if – on top of that- , the above-mentioned aims could be pursued within the global agenda developed by the international community to protect the environment?

Caja Rural de Navarra is a regional retail bank belonging to the European cooperative banking family. Cooperative banks know what it takes to be sustainable, because they serve their local communities, and are expected to reinvest profits for the future generations of clients and members instead of maximising short-term shareholder value.

We issued our first Sustainable Covered Bond in 2016, and we have followed this year with a Sustainable Senior Unsecured transaction. Our Sustainability Framework (which has a Second Opinion by Sustainalytics) has nine different social and environmental lines, one of them being “Energy Efficiency”. However, we were disappointed by the fact that we had not enough data to include buildings’ energy efficiency (that is, for residential and commercial purposes) within the framework at the time when it was developed.

This is why we have joined the EMF-ECBC’s EeMAP initiative.

The EeMAP initiative has in my view all the ingredients to successfully incentivise both borrowers and lenders to embark on the improvement of buildings’ energy efficiency in Europe:

  • Since its creation, it has involved finance, valuation and technical institution and experts.
  • It has adopted a professional approach by acknowledging the need to find positive evidence to prove the lower risk nature of energy efficiency financing, involving academics from top Universities and getting the support of the European institutions.
  • It has the enthusiasm and long-term view for such a complex project to be pushed forward.

Green finance is a multifaceted subject: We – banks – can originate those assets on the first place by lending to our clients, but we can also issue bonds with a “use of proceeds” commitment (Green or Sustainable bonds) and benefit from the lower risk of these loans and also from the diversification of investors’ base that green issuing brings; Borrowers can improve their building’s value and reduce their energy bill; The EU can greatly improve the CO2 reduction targets; and new jobs and growth can be created from the huge investments that the renovation of an outdated housing stock in Europe would release.

Nevertheless, the Energy efficient Mortgages Action Plan (EeMAP) initiative faces huge challenges. Mortgage lending is a very relationship-intensive, cumbersome and highly bureaucratic process, with a very granular base and still within nationally regulated legal frameworks.

This is why, in my view, retail banks should get involved in EeMAP. They (we) have the capabilities to reach a dispersed population, with a regional focus that takes into account local differences in housing and energy needs. They can participate in the financing of buildings’ improvements as well as in the construction sector’s necessary involvement in these efficiency upgrades.

Caja Rural de Navarra, as part of the Spanish Caja Rural Group and UNACC, belongs to the European Association of Cooperative Banks (EACB). The EACB is engaged in the dialogue with the European institutions and has participated in the consultation by the High Level Expert Group on Sustainable Finance (HLEG), highlighting the role played by co-operative banks in stimulating investment and creating jobs by lending to the real economy and financing activities aimed at climate protection and renewable energy.

The European energy efficiency mortgage (EEM) can be a game-changer for the European economy and for its citizens. It can also mobilise finance to enable an economic development which is at the same time compatible with the preservation of the environment through a meaningful reduction of CO2 emissions in line with the objectives included in the EU’s 2020 climate and energy package and the Paris Agreement.

The European banking sector, and particularly the retail networks that form the backbone of the financial services in our continent, are an essential ingredient of any economic strategy oriented towards a more sustainable economic model that takes a broader and more inclusive perspective of the different stakeholders – present and future – involved.
We believe that the EeMAP initiative is a clear example of a win-win project which needs to be fostered. As once a character of Cervantes (El rufian dichoso, 1615) said: “Good acts never lack rewards”. 400 years later, his sentence still holds true.

Energy Efficiency Financial Institutions Group Workshop in Paris 12/12/2017

12 December 2017: Energy Efficiency Financial Institutions Group Workshop in Paris

EeMAP recent findings were presented at the EEFIG meeting

EeMAP: High Visibility in the Press and at International Events

We are delighted to share that the EeMAP project is starting to attract attention in both national and international press thanks to efforts of the EeMAP consortium partners and their respective members and contacts to promote and disseminate the Project and its first major findings in relation to the financing of energy efficiency and all of the relevant components of that.

On 15 November 2017, the Financial Times cited the project in an article on the growing green bond market, noting that EeMAP “could further boost green bond issuance by banks, by providing them with a larger pool of green assets to fund.” Following the launch of the EeMAP technical reports at the Irish Green Building Council’s 26 October 2017 Conference on Housing, a 5 November 2017 Irish Times article on why quality housing matters noted that the EeMAP project “could be the carrot that convinces both home buyers and sellers” of the merits of greener buildings. Additionally, the lead article Brüssels macht Druck, published in the Immobilien & Finanzierung (number 21 – 2017), considers EeMAP as a first preliminary positive step forward for a deep renovation of the building stock.  On 30 November EeMAP was mentioned in Il Sole 24 Ore – Casa as a market-led initiative focused on the design and delivery of “green mortgages” and on the  improvement of the energy efficiency of buildings. Finally, a video interview featuring Luca Bertalot, EeMAP Coordinator, highlighting  the main challenges of the initiative, was published on, an Italian website addressed to banks and financial organisations. A video filmed for Belgian tv station, KanaalZ, to mark the first EeMAP National Roundtable in Belgium on 15 November and featuring Luca Bertalot will be televised shortly and will also be available in due course on the EeMAP website.

Astana, July 24, 2017: Clean energy solutions for the buildings of the future

EeMAP is not only attracting attention from journalists, but the EeMAP consortium has also been invited to present the initiative at several high-profile events on climate issues, such as the EU Energy Day at Expo 2017 in Astana on 24 July and COP23 in Bonn on 9 November.

A video filmed for Belgian tv station, KanaalZ, to mark the first EeMAP National Roundtable in Belgium on 15 November and featuring Luca Bertalot will be televised shortly and is also available here 

The forthcoming international events where EeMAP will be promoted and disseminated are One Planet Summit and its side events in Paris on 11 and 12 December. The Summit is being organised by the Office of the Presidency of the French Republic and aims to mobilise the international community, private players, the financial sector, local governments, the research community and civil society to step up the fight against climate change, focusing on two main priorities: reducing greenhouse gas emissions and protecting people from the effects of climate change.  This is a unique opportunity to further disseminate the EeMAP initiative: Follow us and stay tuned!

EeMAP White Paper: How to Spark a Market in Green Mortgages

By James Drinkwater, Regional Director, Europe Network – World Green Building Council

If you look deep into the dynamics of the property sector, there are two groups of actors that have a greater influence than any others: building occupants and institutional investors. The behaviour of these two groups will, to a large degree, determine whether or not we meet our sustainability goals in the building sector, which accounts for over a third of Europe’s emissions.

In Europe, there is no more central instrument to both consumers and institutional investors than the mortgage.  Mortgages account for around a third of the total assets of the European banking sector – equivalent to half of the EU’s GDP (EUR 7 trillion at the end 2016). The potential of this capital to drive deep energy efficiency improvements to Europe’s building stock and lower its emissions is enormous, but it remains almost entirely untapped.

Apart from a few niche ‘green mortgage’ products offered by a tiny number of banks to reward consumers for purchasing or renovating greener homes, building performance and mortgage loan conditions are not being linked. However, in late October 2017 the Energy efficiency Mortgages Action Plan (EeMAP) initiative published a ground-breaking new ‘White Paper’ aimed at changing all that.

Through its partners, the EeMAP project brings together the separate worlds of institutional investors, consumer experts, property valuers and green building experts, to establish a European ‘energy efficiency mortgage’ product. The White Paper, published on 26 October, sets out a series of key recommendations for the development of energy efficiency mortgages across Europe, to create a market that helps fill a significant part of Europe’s energy efficiency financing gap. Crucially, given the cross-border nature of banking and capital markets, EeMAP is looking to establish a pan-European approach to green mortgages.

At the centre of the EeMAP project is the belief that a building’s energy efficiency has a risk mitigation effect for banks as a result of its impact on running costs and a borrower’s ability to service their loan, and on the value of the property. If this can be proven, energy efficient mortgages could offer homebuyers across the EU better interest rates or additional capital in return for purchasing more energy efficient homes or committing to energy saving renovation work. This is precisely what a 2018 EeMAP pilot phase aims to prove.

“EeMAP has the potential to change consumer behaviour and encourage energy efficiency investment in buildings via mortgage finance. In this way, the mortgage market could be a driver of the improvement of the quality of the EU’s building stock, opening new market opportunities, stimulating best practices and making banks’ portfolios more resilient; that is why we support the development of the EeMAP initiative.”

Luciano Chiarelli, Head of Group Secured Funding at UniCredit,

Based on feedback from market-leading banks across Europe, the EeMAP White Paper sets out the following key recommendations:

1. A simple and standardised framework for an energy efficient mortgage would help to pave the way for the market entry. Similarly, a clear definition of an energy efficient mortgage would help banks to make a differentiation between energy efficient and conventional mortgages in their risk management processes. In this way they can build datasets, to further demonstrate the risk reduction impacts of energy efficiency.
2. Banks need clear guidance on how and what to instruct property valuers in relation to the energy performance of buildings. This would help to ensure that energy efficiency is appropriately taken account of in property valuations.
3. Simple and proportionate energy efficiency measurement indicators would help banks to integrate energy efficiency into credit risk assessments.

The White Paper builds on four EeMAP reports, which represent the most up-to-date body of knowledge on the research and principles that should inform the growth of Europe’s green mortgage market. These examine current market practices within the areas of green finance, building performance indicators, property valuation and the impact of energy efficiency on risk, and are a must read for those who are interested in how we unlock private sector finance for energy efficiency. This research is now informing the design of key principles to underpin EeMAP’s pilot phase, due to launch in June 2018.

The White Paper has already been presented at a number of key climate events, including Buildings Day at the recent COP23 climate change negotiations, where focus on green finance is intensifying.  Significantly, there is growing enthusiasm from major investors and energy utilities to support the EeMAP initiative.

On the launch of the White Paper, Agnès Gourc, Director of Sustainable Capital Markets at BNP Paribas said:

“Financing of energy efficiency projects opens tremendous social and economic opportunities for households, lenders and investors. In order to satisfy investor appetite for green bonds, we need to develop the right mechanism to deliver energy efficient assets. We need to focus on a simpe, robust and cost-efficient framework embedding energy efficiency into the mortgage origination and funding processes.”

Marco Marijewycz, representing EeMAP partner E.ON, Europe’s largest green utility, said:

“Improving our customers’ lives by helping them to reduce their energy costs through smarter and more efficient energy solutions is at the heart of E.ON’s business. Affordable finance is key to unlocking the potential of these solutions at scale and we believe energy efficient mortgages could offer customers a simple, understandable solution.”

Importantly, the White Paper also issues a call to action to key players whose input and support is vital to drive forward energy efficient mortgages both at EU and at national level across the region. Ahead of a market consultation in February and March of next year, it calls on all interested organisations to participate in forming the proposals for energy efficient mortgages which will underpin the EeMAP pilot phase. Contact if your organisation wishes to join forces with EeMAP and spark a market in green mortgages.

Banks to help tackle climate related risks and safeguard financial stability

The days when energy efficient finance was only a vision upheld by few are numbered. Once seen as a niche activity, green and energy efficiency finance is now shaping the international agenda, and green/energy efficiency financial products are scaling-up across industries and capital markets.

The political drive for green finance has pushed forward the development of a green financial market with banks increasingly allocating billions of euros to green and energy efficiency investments. Even though the political will for energy efficiency finance has never been bigger than it is today, the present lack of standardised large-scale energy efficient asset datasets hampers the development of a true energy efficient financial market by hindering transparency, viability and comprehensive risk analysis, elements which would otherwise act as a driver for further implementation and mobilisation of private bank finance for energy efficient investments.

Though the move to a more low-carbon economy has unquestionably begun, the transformation cannot be delivered by politicians alone. Looking at capital markets, banks are uniquely placed to play a central role by facilitating energy efficiency considerations in the process of purchase/re-mortgage of homes and buildings. Indeed, with buildings representing 40% of the total energy consumption in the EU alone, energy efficient mortgage financing is a top European political priority.

In response, the EMF-ECBC, together with Hypoport, European DataWarehouse, Ca’ Foscari University, CRIF and TXS, has launched a market-led initiative to address the current lack of standardisation in terms of datasets by delivering a framework for standardisation of technical and financial data gathering, with the aim of stimulating energy efficient financing.

The project, which is known as the Energy efficient Data Protocol and Portal (EeDaPP) Initiative, aims to design and deliver a market-led protocol, which will enable the large-scale recording of data relating to energy efficient mortgage assets (loan-by-loan), via a standardised reporting template. The data will be accessed by way of a common, centralised portal, allowing for continuous tracking of the performance of the energy efficient mortgage assets, thereby also facilitating the tagging of such assets for the purposes of energy efficient bond issuance.

In parallel with the political agenda, financial markets and regulators are beginning to recognise that environmental degradation can pose a risk to the financial system with climate changes impacting the value and pricing of carbon intensive assets. Banks can help address climate related risks going forward and safeguard financial stability, with standardised energy effect data being incorporated into risk models, deployed for the purposes of mortgage affordability calculations, used for investor due diligence and accessed by rating agencies and other relevant market participants. The gathering of standardised data records will help to reduce uncertainty about the financial performance of energy efficient assets and their viability, which, in turn, will mobilise private capital into energy efficient investments, strongly supporting the EU political agenda. In doing so, the Initiative also has the potential to be a trigger for financial stability by shedding light on the most effective way of managing climate related risks.

The technical and financial datasets gathered under the EeDaPP Initiative will allow for the linking between energy efficient features of a building, its value and the loan performance, thereby creating a better understanding of the impact of energy efficiency on borrowers’ probability of default (PD) and on loss-given default (LGD). The aim is to identify and demonstrate that energy efficient mortgage assets can be identified for preferential capital treatment based on large-scale standardised data and correlation analysis.

In this way, EeDaPP will build on and complement the Energy efficiency Mortgages Action Plan (EeMAP) Initiative, launched by the EMF-ECBC and its Consortium Partners earlier this year with the aim of creating a standardised mortgage product according to which building owners are incentivised to improve the energy efficiency of their buildings by way of preferential financing conditions linked to the mortgage. Standardised data collection and reporting will also be at the heart of the forthcoming EeMAP Pilot Phase, during which banks will originate energy efficient mortgage products and in which all financial institutions under the EMF-ECBC umbrella are invited to play an active role.

Earlier this year, the EeDaPP Initiative received support from the European Commission in the form of Horizon 2020 funding. In the context of the Horizon 2020 programme, the EeDaPP Consortium will undertake five “operational” Work Packages, each with a clear set of deliverables: (1) identification and summary of market best practices within data systems; (2) definition of energy efficiency reporting criteria; (3) design and delivery of standardised data protocol and common centralised portal; (4) data and substantiation correlation analysis; and (5) roadmap for system integration.

The EeDaPP Initiative will be officially launched at an opening event in H1 2018. More information will follow in due course.

EeDaPP- Energy efficiency Data Protocol and Portal –  is an initiative by the European Mortgage Federation – European Covered Bond Council (EMF-ECBC), European DataWarehouse, CRIF, Hypoport, TXS GmbH, University Ca’ Foscari Venezia and Johann Wolfgang Goethe-Universitat Frankfurt am Main.