Green finance products for sustainable homes must meet new EU rules, experts warn
Green home certifications and mortgage products must align with new EU rules on green finance, the pan-European Smarter Finance for EU consortium has warned.
This article was originally published in issue 46 of Passive House Plus magazine. Want immediate access to all back issues and exclusive extra content? Click here to subscribe for as little as €15, or click here to receive the next issue free of charge
In 2022 the EU passed into law the EU taxonomy for sustainable activities, a landmark policy which is rapidly moving the finance industry towards quantifying and reducing environmental impacts of economic activities. As real estate and construction are downstream of finance, the taxonomy has serious ramifications for these sectors too.
The taxonomy is a classification system established to clarify which economic activities are environmentally sustainable, in the context of the €1 trillion-funded European Green Deal and its targets to cut net greenhouse gas emissions by at least 55 per cent from 1990 levels by 2030.
Smarter Finance for EU spokesperson and Passive House Plus editor Jeff Colley said: "In the absence of sufficiently tight rules and definitions to define greenness, it has been possible for lenders to develop ostensibly "green" property finance products which may lack rigour and focus only on one sustainability feature, such as energy performance. That won't wash any more, because of the EU taxonomy."
Supported by the EU Life programme, Smarter Finance for EU has been established to facilitate the uptake of two key building blocks for decarbonising buildings: credible, evidence-based green home certifications, and tailored green finance products such as mortgages, loans and development finance. The project is essentially the second phase in the broader Smarter initiative. From a standing start the first phase, Smarter Finance for Families, led to €8.5bn worth of investments in certified green homes, and the development of 13 green mortgage and development finance products.
The Smarter Finance for EU consortium's implementing partners include green building councils and energy agencies who are defining or finessing green home certification systems to ensure taxonomy alignment. The consortium is also developing plans to establish a European Centre of Excellence to serve new and existing implementing partners from across Europe.
“We’re also seeking to engage with more banks, funds, municipalities, developers and the entire supply chain of designers, tradespeople and product suppliers required to deliver green buildings,” said Colley. “This is an opportunity to do well by doing good – it’s a multi-trillion-euro business opportunity, but more importantly it’s an opportunity to profoundly improve people’s lives while tackling the converging environmental emergencies facing the world.”
Co-ordinated by the Romania Green Building Council, the partners in Smarter Finance for EU include the Irish Green Building Council, Luxembourg-based sustainable finance facilitator EnerSave Capital, Passive House Plus publishers Temple Media Ltd, the association Energy Efficient Cities of Ukraine, Green Building Council España, Portuguese energy agency Adene, Habitat for Humanity International, and the European-Ukrainian Energy Agency. With energy poverty on the rise across Europe in the aftermath of Russia’s invasion of Ukraine, the consortium also includes a focus on developing hybrid green finance products to help lift vulnerable people out of energy poverty and provide healthy, comfortable homes with low exposure to energy price spikes.
The consortium was invited to present on the project at the EU’s Covenant of Mayors Investment Forum 2023 in Brussels on 25 October. Consortium lead Monica Ardeleanu of the Romanian Green Building Council described the foundations laid by the previous Smarter Finance for Families programme, and Iva Merheim-Eyre of Habitat for Humanity International focused on the new scheme’s overall aims. Finally, Volodimir Smolii of Energy Efficient Cities of Ukraine talked about the specific goals of Ukraine in the project, where the focus will include increasing energy security and ensuring that green building principles are central to Ukraine’s reconstruction efforts – with 200,000 homes destroyed or damaged so far during the war. The event was jointly organised by the European Commission’s Directorates-Generals for Energy and Climate Action and the European Climate, Infrastructure and Environment Executive Agency (CINEA) in collaboration with the Covenant of Mayors.
For more information visit www.smarterfinance4.eu