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Creating an Energy Efficient Mortgage for Europe – A Review of Building Performance Indicators that Impact Mortgage Credit Risk

Buildings account for 40 per cent of energy use in the European Union (EU), and it is estimated that the EU needs to invest around €100 billion annually in building renovations to meet its energy and climate goals. The EU has increased the amount of public funds available for energy efficiency, but the European Commission has indicated that there is a need to boost private energy investments – the EeMAP (Energy efficient Mortgages Action Plan) initiative is intended to deliver a concrete, market-led finance solution to help bridge the gap.

Mortgage lenders have a clear interest in the state of the EU building stock. Mortgage loans are estimated to account for around a third of the total assets of the European banking sector. Investments in building performance improvements can help to free-up disposable income for borrowers through lower utility bills and can enhance property value. As a result, they can reduce credit risk, so they are a win-win for lenders, investors, consumers and climate.

EeMAP has three workstreams addressing the technical, financial and valuation aspects of a European energy efficient mortgage.

This report is focused on relevant technical aspects of building performance assessment. This review of European research and best practice on the energy performance of buildings begins to explore how this could support the initiative’s aims.

Read the accompanying reports by EeMAP on Green Finance, Green Value, and the Impact of Energy Efficiency on Probability of Default.