Laying the foundations in transforming Europe’s building stock


Europe’s buildings are currently deemed at a rate of 97 per cent inefficient making the EU’s building stock both poor performing for energy targets and detrimental to mortgage portfolios. In a bid to make radical changes, the Energy efficient Mortgages Action Plan aims to create, with the support of all stakeholders, a standardised energy efficient mortgage as a significant economic incentive to transform the damaging risks from inefficient buildings into a rewarding, low carbon-built environment

As more houses in Europe are left dilapidated and the overall energy performance condition of its building stock continues to worsen, the need to finance the restoration of buildings to make them more energy efficient is becoming more pressing.

The World Green Building Council (WorldGBC) recently released a report, ‘Creating an energy efficient mortgage for Europe: Towards a new market standard’ in the Energy efficient Mortgages Action Plan (EeMAP) initiative, which set out new market standards to make it easier and more appealing for green mortgages to be implemented and to incentivise the renovation of buildings otherwise left to waste. 

The report, the first for the sector, lays out a building performance assessment criteria to deliver a standardised European framework for energy efficient mortgages as financial incentives for energy efficient buildings. 

With mortgages accounting for a third of the European banking sector’s assets, the criteria in the report for the final energy efficient mortgage framework will be targeted at three core groups: banks and investors, the building sector and energy companies, and governments.


Mutual benefits

Though the report is mainly directed at banks to provide them with a clear guide on how to address better performing buildings in their mortgage portfolios, it also aims to create demand across an EU incentive chain through mutual benefits to further address the positive implications of energy efficient buildings. 

By understanding the needs of each participant in the supply chain (borrowers, lenders, investors, SMEs and the government), the wider European market has the chance to revolutionise the accessibility, appeal and practice of energy efficient mortgages. But understanding the consumers’ perspective is key to ensuring there will be enough market demand for purchasing these products. 

However, to grow the market of energy efficient mortgages to the regional, national, European and even global scale desired, not only will each stakeholder group need to be confident in the impacts of these mortgages, but the report also acknowledges that the financial risk reductions the mortgage scheme proposes need to be proven, and a number of incentivised measures need to be rolled out to increase customer and banker appeal in the form of fiscal measures. 

Performance criteria

To help ensure the risk reductions are delivered, such as preventing extra future costs involved in building maintenance and operation due to changing temperatures and increases in energy costs, and that energy efficient mortgages aren’t simply greenwashing banks, the report sets out a building performance assessment criteria. This criteria is based on existing tools already available in most EU markets.

The establishment of a performance criteria will ensure that energy efficient mortgage products are fit for purpose. It will lay out what performance standards are needed to deliver risk reductions in mortgage lending, meet the expectations of the market and deliver benefits for the customer. The proposed criteria cover three key areas: 

  • Energy performance thresholds:

– An Energy Performance Certificate (EPC) showing;

  1. a) Nearly Zero Energy Building (NZEB) compliant
  2. b) 20% better than current regulations 

OR 30% improvement

  • Ongoing performance monitoring:
  1. a)  Actual consumption (meter readings using smart meters where available)
  2. b)  Revised EPC for renovations (for the purpose of loan performance assessments)
  • Quality assurance requirements regarding works undertaken:
  1. a)  Planned and carried out by qualified/accredited professionals
  2. b)  Planned to prevent ‘lock-in’ i.e. future improvements are not made more difficult/expensive
  3. c)  Documentary evidence of work undertaken

The criteria, founded on the input of 500 experts across Europe to underpin the design and operation of energy efficient mortgages, is currently being tested in the EeMAP pilot scheme initiative by 37 major European banks. The mortgage lender would apply all of these to determine eligibility for an energy efficient mortgage. To accompany the criteria, the report sets out a framework of definitions to summarise in greater detail what compliance evidence is needed, the compliance threshold and the rationale grounding each of the three criteras.  

To help further deliver an effective performance criteria for maximum impact, the report discloses WorldGBC Europe’s extensive research to pinpoint the challenges but also the opportunities of piloting energy efficient mortgages. The report also includes a configuration of the existing opportunities and infrastructure in place in countries across Europe which mortgage lenders are encouraged to work with in assessing the energy performance of buildings and in establishing the mortgages. For example, in some markets voluntary sustainability certificates have been introduced, which EeMAP encourages mortgage lenders to use for energy efficient mortgages.

However, the diversity of each European market means that with common tools there also comes missing data, adding a level of difficulty when determining the standardised level of energy performance required to obtain the mortgage. Further data collection is proposed in the report to provide more evidence on previous studies that link higher energy performance of buildings with lower mortgage risks. 


A key element to the continuing design of energy efficient mortgages and future success is to provide assurance and guarantee confidence to all stakeholders involved. The report highlights that to ensure committed backing from lenders for example, a guarantee needs to be made that the predicted performance of a building is matched in practice through third-party or contractor liability schemes, a solution currently underused in the residential market. 

One solution that the report addresses to alleviate the challenges of implementing the scheme and enhance existing EPCs is building renovation passports. However, though these tailored building plans prevent lock-in – when renovation work makes it more difficult, or costlier, to undertake further work in the future – they cannot be incorporated into the pilot scheme. A feasibility study on their wider adoption across Europe is not available, and so alternative means to prevent lock-in are reported to be needed in the meantime. Once a study is available, EeMAP will use it to inform future initiatives in the EeMAP.

In order to take the next steps in creating an energy efficient market in Europe, the report ascertains how the EeMAP consortium will continue to ensure the building performance assessment criteria remains fit for purpose. The pilot scheme will provide a lot of data and feedback from the pilot banks on the proposed framework for future developments, whilst the WorldGBC’s network will continue to gather expertise from national stakeholders on implementing the framework and raise awareness globally on the benefits of renovating and transforming Europe’s building stock.  

The report concludes by outlining in detail the immediate and long-term actions that can be taken to enable as many building owners as possible across Europe to participate in energy efficient mortgages, so that the housing stock can turn the tide towards a thriving, clean environment. H

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