Peter Sweatman, Author
Introduction of Mortgage Portfolio Standards (MPS) in EU law can unlock private finance to green European buildings.
Published in October 2021
Experts assert that to meet its 2030 climate targets, Europe will need to invest upwards of €2.75 trillion to renovate 35 million buildings over the next decade. Considering limited public financing available, bank lending could play a key role in making European buildings warmer, healthier, and more sustainable for millions of people. Almost all 50 million mortgaged European homes will need energy efficiency renovation works between now and 2050. Hence, as there are €7 trillion of mortgages outstanding in Europe, retail banks are the largest financial stakeholders in European buildings.
To unlock the potential of banks and mortgage lenders in accelerating the EU’s Renovation Wave, this report by Climate Strategy & Partners calls for the introduction in EU legislation of the innovative mortgage portfolio standards (MPS). Mirroring fleet-wide emission standards for cars, a mortgage portfolio standard would require retail banks to improve the overall energy performance of the properties within their loan portfolios over time in line with the 2030 and 2050 climate targets.
As the EU reviews its buildings and financial regulations to deliver a 55% greenhouse gas emission reduction by 2030, this report proposes the inclusion of mortgage portfolio standards in the Energy Performance of Buildings Directive (EPBD) currently under review and their alignment with EU financial regulations.
Mortgage portfolio standards a can help Europe achieve its climate objectives, through:
Peter Sweatman, CEO of Climate Strategy and author of the report said:“In developing Mortgage Portfolio Standards, we took proven regulatory tools that have decarbonised electricity in the USA and vehicles in Europe, and applied them to buildings. When MPS are applied by banks to tens of millions of mortgages, the resulting transparency and new renovation funding offers will provide a competitive advantage for those green leaders who are using them.”
Ciarán Cuffe, Member of the European Parliament – Group of the Greens/European Free Alliance:“In order to promote deep renovations we need integrated solutions that are encouraged by green financing instruments such as on-bill financing, energy efficient mortgages, renovation grants and mechanisms that incentivise the upgrade of existing inefficient buildings at the portfolio level.”