effi ient mortgages [ reporting · 2019-01-16 · effi ient mortgages [ reporting protocol and data...
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MARKET NEEDS AND GAPS IN ENERGY
EFFICIENT MORTGAGESrsquo REPORTING
PROTOCOL AND DATA PORTAL
IMPLEMENTATION
Setting on the necessary requirements for a harmonised reporting processing and disclosure of Energy Efficient Assets
D32 Technical Report on Market Needs and Gaps
249
Executive Summary
The first EeDaPP report - including a mapping exercise ndash which provided a detailed analysis of existing
green reporting criteria in the energy efficiency and buildings sectors allowed us to narrow down the
variables and define the list of criteria to underpin the data protocol The present report identifies
market gaps and needs in the Energy Efficient Mortgages (hereafter EEM) market with regard to
information and data gathering processing and disclosure
Gathering Market players generally and lending institutions in particular need to gather and
consolidate information coming from different sources of different natures and with several levels of
aggregation Moreover the implementation of the data gathering and reporting protocol must be
elaborated with the objective of optimisation and cost mutualisation for the EEM product and its
integration with IT systems already in place (ie integrate with existing reporting requirements and
practices minimise additional criteria)
Processing The EeDaPP initiative aims to provide relevant robust and reliable information to assess
EEM performance and risk evaluation The common database is an unprecedented collection of
reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
Disclosure The green bond market is growing rapidly and is key to the mobilisation of sustainable
investments As such it needs clear yet rigorous criteria for eligible assets for each key sector (new
and existing buildings in our case) and a harmonised and transparent reporting process aligned with
existing international standards regulatory developments and market best practices
To reach these objectives the EeDaPP initiative has to overcome the following gaps in the market
- Data availability issues at European and national levels regarding financial property valuation
and energy performance data
- Data consolidation harmonisation and comparability issues when processing information
coming from several data sources of different formats natures and calculation methods
- Data quality and representativeness issues for risk impact assessments
- Data monitoring issues especially regarding dynamic and evolving sustainability targets
criteria stringency and energy consumption reporting and monitoring
The ultimate objective of this work together with the previous publication (D31 ndash available here ) and
a final report (to be published in the future) is to elaborate a detailed and comprehensive list of energy
efficiency and performance criteria The full list of relevant data fields is to be collated in a reporting
protocol and common data portal which will allow the gathering processing and disclosur of relevant
information on Energy Efficient Mortgages across European markets
Source Activity WP3PU Editor L Bertalot (EMF-ECBC) Authors D Leboullenger J Johnson L Bertalot D Westig Status Final Date 30112018 Contractual Delivery Date M6
D32 Technical Report on Market Needs and Gaps
349
Table of Contents
1 INTRODUCTION 5
2 IDENTIFYING MARKET NEEDS 6
21 Gathering 6
211 Market needs Energy Efficient Mortgages framework and stakeholders 6
212 Existing reporting frameworks 8
22 Processing 14
221 Market needs Establish a direct link between loan level credit and mortgage risks
property valuation and energy performance 14
222 Existing studies on the link between the energy performance of buildings and mortgage
defaulthelliphelliphelliphelliphelliphellip 14
223 Reporting on the financial performance and related risk of Energy Efficiency
investments and energy upgrades 16
23 Disclosure 16
231 Market needs Provide the missing link from origination to funding 17
232 Impact reporting 18
233 Alignment with existing taxonomy international pledges and regulatory
developmentshelliphelliphelliphelliphelliphellip 20
3 ASSESS MARKET GAPS 25
31 Data Availability 25
311 Overall assessment 25
312 Energy performance data availability 25
313 Link between energy performance property valuation and mortgage data 29
32 Data Consolidation Comparability and Harmonisation Issues 30
321 Data consolidation and common key identifier 30
322 Harmonisation of the different methodologies and definitions 30
323 Calculation methods and comparability issues 32
33 Data Minimum Quality and Representativeness 35
331 Sampling problem coverage and data history 35
332 Lack of default data for the relevant period 36
34 Data Processing Monitoring and Usage 36
341 Privacy and contractual considerations 36
D32 Technical Report on Market Needs and Gaps
449
342 Practical issues Dynamic monitoring 38
343 Evolving sustainability targets 39
4 Conclusions and next steps 42
5 Annexes 43
51 List of figures and tables 43
52 EPC coverage 44
53 Data avaialbility Overall assessment 45
D32 Technical Report on Market Needs and Gaps
549
1 INTRODUCTION
The EeDaPP project seeks to provide a protocol and a technical solution for the design and use of a
Standardised Reporting Template and Common Data Portal for energy efficient mortgages and
assets This can be segmented into three key sections as illustrated in the figure below First EeDaPP
as an IT system solution proposes a reporting protocol to collect data and gather information on
energy efficient assets Second using the data collected provide a reliable database for the analysis
of the risk profile and performance of this new financial product and assess the statistical evidence
of the impact on energy performance on key mortgage indicators Loan to Value (LTV) Probability of
Default (PD) and Loss Given Default (LGD) Thirdly and finally the reporting protocol can be used to
disclose key features of Energy Efficient Assets to serve a potential certification or labelling process
to be used as an impact report for funding purposes and as empirical evidence for policy and
prudential purposes
Gathering
bullIT System solution to gather EEM data information and characteristics
bullReporting Criteria and Management Standardisation
Processing
bullEEM Performance and Risk Analysis ndash analyse and quantify the impact of energy efficiency on major risk indicators such as the impact on property value (LTV and LGD) and on the probability of default (PD)
Disclosure
bullOutput reporting for EEM certificationlabelling
bullImpact reporting for funding tools
bullStatistical evidence for empirical policy recommendations and prudential treatment of EEM
D32 Technical Report on Market Needs and Gaps
649
2 IDENTIFYING MARKET NEEDS
21 Gathering
Market needs to design a harmonised common data portal which market players generally and
lending institutions in particular need to gather and consolidate information coming from different
sources of different natures and with several levels of aggregation Moreover the implementation of
the data gathering and reporting protocol must be elaborated with the objective of optimisation and
cost mutualisation for the EEM product and its integration with IT systems already in place (ie
integrate with existing reporting requirements and practices minimise additional criteria)
211 Market needs Energy Efficient Mortgages framework and stakeholders
The EeDaPP initiative aims to develop reporting standards and design a common data portal for EEM
This implies gathering relevant information from several stakeholders The Energy Efficient Mortgage
market is complex as it involves numerous and diverse actors from both the public and the private
spheres on the retail and capital markets sides (see Figure 1)
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side
Source EeDaPP Consortium
The Energy Efficient Mortgage data reporting protocol is an integrated tool that gathers key data
and indicators from three different ldquolayersrdquo according to the sourcing and the use of the data
provided
EEM
Borrowers
Banks
Valuers
Public Authorities
SMEs
Technical Experts
EEM Portfolio
Investors
Capital Markets
Authorities
Certification Bodies
Rating Agengies
Internation-al pledges
on Paris Agreement
Green Bond
Issuers
D32 Technical Report on Market Needs and Gaps
749
Loan level (banks and borrowers) On the origination side borrowers are at the very beginning of the
value chain as they trigger the energy efficiency investment (either by buying a dwelling that is already
energy efficient or by undertaking energy upgrades on their property) These initial investors can be
real-estate companies (private or social housing funders) or households (that can be either private
landlords landlords in co-ownership or tenants) that become borrowers once they decide to finance
their project with bank lending and apply for financing via a loan or a mortgage from lending
institutions These lending institutions can be of several types private banks specialised banks or
public entities that operate with financial intermediaries Note that in some cases specific groups of
households can rely on specialised agencies1 such as credit assessors as a first point of contact Most
secured lending requires the gathering of information on both the status of the borrower herhis
creditworthiness determined by the lender and the quality of the underlying collateral The former is
derived directly from the borrower the latter is advised by a valuer or via an AVM (automated
valuation model) instructed by the lending institution The role of the valuer who is typically a
qualified professional operating in line with requirements laid down by their professional body is
normally to supply an estimate of the appraisal value of the asset as at the appraisal date of valuation
(Market Value - MV or Mortgage Lending Value - MLV) This value will determine the (current) Loan
to Value ratio which is determinant for the bank to assess the amount of the requested loan relative
to the value of the property
Asset level (energy performance of the building and energy efficiency upgrades) The value of the
property and selected features are assessed by valuers or valuation models The energy performance
of the property is assessed by technical experts who perform energy audits and deliver Energy
Performance Certificates (EPC) The energy performance assessment of the building can also be
inferred by hedonistic modelling (ie Automated Valuation Models) to obtain ldquotheoreticalrdquo EPC (see
the Dutch and Belgian cases cited later in this report) In most cases the energy efficient mortgage will
be granted for the purchase and subsequent energy efficient renovation of existing properties The
energy performance resulting from specific renovation works will be assessed andor certified through
building renovation roadmaps and involve the expertise of constructionbuilding actors
Portfolio level (EEM certification and labelling for funding purposes) Energy efficient mortgages
pooled in a portfolio can constitute a new kind of asset class that classifies EEM portfolios as a ldquo2deg
alignedrdquo (aligned with the COP21 Paris Agreement pledges to limit climate heat change to less than 2
degrees Celsius) or ldquogreenrdquo bond eligible To align with current market practices and upcoming
regulations and requirements covered bond and securitisation issuers will need to disclose specific
information relative to the alignment of the portfolio to sustainable goals and the ldquogreenrdquo taxonomy
in place (see more on this in Section 2 of the report) They are subject to second party opinions and
external ratings from specialised agencies and certification bodies Therefore there is a need for in-
depth and robust data on energy performance in order to ensure that European low carbon energy
1 In France or in Ireland for example specialised agencies (ANAH and SEAI) are providing funds and grants to fuel-poor households to refurbish their homes
D32 Technical Report on Market Needs and Gaps
849
transition targets set at national and international levels relative to energy consumption and the
carbon footprint of the residential sector are met
Table 1 Reporting ldquoLayersrdquo and information sources
Reporting ldquoLayerrdquo Datainformation source Aggregation Level
Financial reporting Mortgage Lending InstitutionData repositories
Loan level
Valuation reporting ValuerReal estate data providersLender PropertyIndividualloan level
Energy performance reporting
Energy AuditorsArchitectsBuilding performance logbookGreen building label certifiers
PropertyIndividual level
Impact reporting Funding instrument issuerSecond party opinionldquoGreen bondrdquo certification agencies
Portfolio aggregated and macro level
Source EeDaPP Consortium
212 Existing reporting frameworks
For time cost and resource optimisation purposes the EeDaPP initiative must build on all existing
reporting templates and framework to gather the relevant data on Energy Efficient Mortgages
To date there are several reporting methods andor databases in place regarding the information that
the EeDaPP data portal needs to collate such as on the financial performance of loans property
valuation data the energy performance of the building stock energy efficiency upgrades and relevant
public policies regarding energy efficiency and performance in European countries
Financial performance reporting
Regarding financial reporting there are already several mandatory and regulatory reporting
frameworks that mortgage lending institutions must comply with and use to deliver data to their
regulator for transparency and prudential risk monitoring exercises These frameworks are either
public or confidential and comprise mandatory or optional reporting variables They constitute the
foundation of the EeDaPP reporting protocol and requirements regarding mortgage related and loan
level financial data
D32 Technical Report on Market Needs and Gaps
949
Table 2 Existing Data Templates
By fulfilling their reporting duties for their financial review either at loan level or at portfolio level
lending institutions can rely on data providers and repositories
Data repositories are directly involved in the development of a standardised data platform for Energy
Efficient Mortgages because of their extensive experience in defining reporting criteria and formats
and due to their implicit existing and often long-standing relationships with data owners (or data
providers which provide the data on behalf of the owner) in other words banks This means they are
uniquely positioned to explain the benefits to their data owners of the provision of this data and to
actively encourage data owners to provide this data Data repositories are furthermore crucial in
promoting the availability of additional robust and reliable energy efficiency data related to
residential and commercial mortgage loans and related debt instruments to their extensive network
of users eg lenders issuers investors rating agencies and central banks etc2
Credit reference agencies or Credit bureaux in some countries are companies which store
consumersrsquo utilities payment data with the purpose of credit scoring and other services (for example
fraud prevention) According to an ACCIS survey conducted in 2018 countries where energy utilities
supply payment data are Austria the Czech Republic Denmark Germany Iceland Poland Romania
Spain Switzerland and the United Kingdom Many banks are already in a business relationship with
2 Members of the EeDaPP Consortium European DataWarehouse Hypoport TXS CRIF
Current existing data-templates
Description Link
STS Residential Draft Template
Regulation shall apply to securitisations entered into on or after 1 January 2019
httpswwwesmaeuropaeupolicy-activitiessecuritisation
European Central Bank (EDW) Templates
The loan-level reporting requirements started on 3 January 2013 for RMBS and on 1 March 2013 for CMBS
httpswwwecbeuropaeupaymcollloanleveltransmissionhtmlindexenhtml
Rating Agency Templates
Quite similar and recently in most cases very similar to ECB loan level template (see above)
Not public
HTT NTT Harmonised investor report (HTT) and national investor report (for Dutch issuers available on issuer-website)
httpswwwcoveredbondlabelcomissuersharmonised-transparency-template
DSA Dutch national standard for investor reports used for securitised transactions
httpswwwdutchsecuritisationnlinvestor-reporting
AnaCredit Regulation
Dataset containing detailed information on individual bank loans in the euro area
httpswwwecbeuropaeustatsmoney_credit_bankinganacredithtmlindexenhtml
Source EeDaPP Consortium
D32 Technical Report on Market Needs and Gaps
1049
credit reference agencies and therefore they could represent an option to access the payment data
and subsequently use payments as a proxy to calculate savings
Reporting of the property prices and valuations
Databases at property level on real estate prices and characteristics exist at national level but are
gathered and stored by different actors in different EU countries Access is made publicly available for
research and commercial purposes in some countries but not all (free access in the UK and
Netherlands for a fee in France etc)
Examples of (semi-) public registers
- Notary transaction databases (France Belgium)
- Real-estate data providers (the Netherlands)
- Public institutions (eg the Royal Mail in the United Kingdom)
Real-estate data providers are independent technology companies specialising in the statistical
analysis and valuation of real estate Such companies can perform Automated Valuation Models
(AVM) for valuation of individual homes Their services can be used by rating agencies mortgage
lenders investors intermediaries validation institutes housing corporations consumer
organisations real estate companies brokers government agencies and regulators The European
AVM Alliance (EAA) was launched as a pan-European initiative at the end of 2012 with its mission
being to promote and standardise the usage of AVMs resulting in a consistent approach to automated
valuations in Europe EAA members include Calcasa (the Netherlands) Hometrack (the United
Kingdom) Eiendomsverdi (Norway) Vaumlrderingsdata (Sweden) CRIF (Italy) Tinsa (Spain) On-Geo
(Germany and Austria)
Reporting and data tools on the energy performance of the building stock
EU Building Stock Observatory The European Commission and the Building Performance Institute
Europe (BPIE) launched its Building Stock Observatory3 in November 2016 This constitutes an existing
platform to monitor and assess the energy performance of the existing building stock across Europe
To do so it assesses improvements in the energy efficiency of buildings and the impact of these on the
actual energy consumption of the building sector overall The Observatory contains a database a data
mapper and provides factsheets tracking
- Energy efficiency levels in buildings in individual EU countries and across the EU as a whole
- Different certification schemes (EPCs and nearly Zero Energy Efficient Buildings - nZEBs4) and
how they are implemented in terms of the financing available for renovating buildings
3 httpseceuropaeuenergyeneubuildings 4 Nearly zero-energy buildings (nZEBs) have very high energy performance The low amount of energy that these buildings require comes mostly from renewable sources
D32 Technical Report on Market Needs and Gaps
1149
Energy poverty5 levels across the EU
Over recent years the BPIE contributed to the development of several tools within the framework of
EU-funded projects and more Among these the European project ZEBRA2020 was developed to
monitor the market uptake of nZEBs across Europe and covers seventeen European countries and
almost 90 of the European building stock (EU amp EEA) These countries have different climatic
conditions polices and economic capabilities The ZEBRA2020 data tool offers a user-friendly
presentation of indicators related to the overall building stock and to nZEB activities The first part of
the tool presents an overview of the current building stock including renovation and construction
and monitors Energy Performance Certificate (EPC) activities by country (focusing on the projectrsquos
target countries) The tool endeavours to overcome data gaps and provide comprehensive datasets
which support stakeholders in their efforts to consolidate the transition to an nZEB market The
second part of the tool determines relevant indicators of nZEB buildings constructed after 2010 in
selected European countries Furthermore it aims to provide information on best cases in Europe
thereby showing most recurring technologies materials and strategies towards the nZEB target The
tool distinguishes between residential and non-residential nZEB buildings and determines some of
the most significant indicators regarding energy performance passive and active solutions and
production of renewable energy
Reporting on energy efficiency upgrades
The De-risking Energy Efficiency Platform (DEEP)6 is an open source database for the monitoring and
benchmarking of energy efficiency investments that provides detailed analysis and evidence on the
performance of energy efficiency investments in both commercial and residential sectors to support
the assessment of the related benefits and financial risks The DEEP platform offers the following
services
- Key Figures Provides a quick overview of the buildings and industry projects in the DEEP
- Data Overview Provides a more comprehensive (but still aggregated) overview of the
energy efficiency projects in the DEEP
- Chart Views Allows the user to view and filter a number of predefined charts for buildings
and industry energy efficiency projects
- Add and Manage Projects Data providers can upload and manage data on their energy
efficiency projects
- Analysis Toolbox Allows users to create charts in a dynamic and highly customisable
manner
5 Energy poverty is a multi-dimensional concept based on several prices income housing and living condition indicators More information can be found here 6 httpsdeepeefigeu
D32 Technical Report on Market Needs and Gaps
1249
- Benchmark Projects Allows users to benchmark their own projects and portfolios of
projects against a selected group of reference projects from the DEEP database
The EEFIG DEEP platform reports key financial and energy indicators from over 5000 energy efficiency
projects in buildings including almost 2000 residential multi-family buildings financed and developed
between 2012 and 2016 The data on energy efficiency projects included in the DEEP has been
provided by public and private investment funds and financial institutions national and regional
authorities as well as energy efficiency solution providers Data is stored and managed at the
European Commission level within DG Energy
Building Typology and Energy Consumption data portal TABULA7 as part of the EU-funded research
projects (2009-2012) TABULA residential building typologies have been developed for 13 European
countries Each national typology consists of a classification scheme grouping buildings according to
their size age and further parameters and a set of exemplary buildings representing the building
types These have been published by the project partners in national Building Typology Brochures
written in their respective languages As a common element all brochures contain double page
ldquoBuilding Display Sheetsrdquo for all example buildings on which energy related features and the effects
of refurbishment measures are illustrated graphically With a view to exchanging information at
European level the TABULA WebTool provides an online calculation of the exemplary buildings from
all countries displaying their energy related features and the possible energy savings that could be
realised by implementing refurbishment measures The basis of the TABULA WebTool is a simple and
transparent reference procedure for calculating the energy need the energy use by energyware and
the energyware assessment (primary energy carbon dioxide costs) The tool also provides an
estimate of the energy savings per msup2 per year if the selected dwelling undergoes energy upgrades
(classified in three categories existing state usual refurbishment and advanced refurbishment)
Individual Building Renovation Roadmap (iBROAD) Building data passport (Logbook)8 The iBRoad
project works on developing an Individual Building Renovation Roadmap for single-family houses This
tool provides a customised renovation plan over a long-term period (10-20 years) The renovation
roadmap is combined with a building logbook a repository where all the buildingrsquos related information
can be stored and continuously updated The type of information stored in the logbook and its
functions can evolve over time and could range from energy production and consumption to
equipment maintenance as well as insurance property plans and obligations energy bills smart
meter data and links to available financing options for renovation projects (eg green loans
incentives tax credits) The logbook will collect and structure information in five modules (General
and administrative information Building construction information Building Energy Performance
Building Operation and Use and SMART information collected through information and
communication technologies (ICT) such as IoT - Internet of Things appliances)
7 httpwebtoolbuilding-typologyeupdfur 8 httpsibroad-projecteunewsthe-logbook-data-quest
D32 Technical Report on Market Needs and Gaps
1349
Within that project several regional initiatives were developed and should enter into operation soon
such as PORTAL CASA + in Portugal and the Woning Pass in the Flanders region (Belgium)9
Netherlands EPC open database On the website httpwwwenergielabelatlasnl all the EPCrsquos in
the Netherlands are publicly available This openly accessible register displays full coverage in energy
performance labels at building unit level based on either a theoretical EPC or effectively delivered
certificate The database also displays a breakdown of the labelled energy performance for each
designated area (at district levels) as well as the average EPC rank
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot
Source Energielabelatlas
Reporting on energy efficiency policies
IEA Building Energy Efficiency Database (BEEP) - discontinued The International Energy Agency
provides a database of all registered public policies regarding energy efficiency
httpswwwieaorgbeep It provides an overview analysis of each country and a detailed list of
existing building codes labels and incentives in place The last update of this database was is 2010
Odysee-MURE Policy database MURE (Mesures dUtilisation Rationnelle de lEnergie) provides
information on energy efficiency policies and measures that have been carried out in the Member
States of the European Union The information is accessible by query in the database10
9 Prototype Online Tool available here here and here 10 httpwwwmeasures-odyssee-mureeutopics-energy-efficiency-policyasp
D32 Technical Report on Market Needs and Gaps
1449
22 Processing
Market needs The EeDaPP initiative aims to provide relevant robust and reliable information to
assess EEM performance and risk evaluation The common database is an unprecedented collection
of reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
221 Market needs Establish a direct link between loan level credit and mortgage
risks property valuation and energy performance
The underlying business case of a future EEM product is that there is an impact of the energy
performance of a residential or a commercial building on the level of risk associated with the mortgage
financing the property and its energy efficiency Energy Efficient Mortgages are less risky to finance
and therefore less costly in capital at balance sheet level for the bank because both the property value
and the borrower risk profile are better compared to another loan all other things equal One of the
objectives of the EeDaPP initiative is to provide statistical evidence supporting this business case and
establishing a direct link between loan level credit and mortgage risks property valuation and energy
performance
The EeDaPP consortium partners are currently researching the correlation between energy efficiency
in buildings and the probability of default (PD) associated with the mortgage The research team is
currently investigating the Dutch residential market using European Data Warehouse loan data and
Dutch Energy Agency (RVO) data on energy performance using EPCs and their findings are to be
published in a later stage
222 Existing studies on the link between energy performance of buildings and
mortgage default
To date there exist very few research studies that investigate the relationship between energy
efficiency and default rates and those which do mainly focus on the United Statesrsquo (US) market The
main reason for this is that there is a significant lack of data available in Europe on both financial and
energy efficiency at loan level with a direct matching link (ie datasets that contain both energy and
financial loan level data)
Focussing on the European market a preliminary study11 published by Bank of England uses loan
performance data for residential mortgages in the entire UK (year-end 2017) matched with the energy
performance certificates (EPCs12) of the underlying properties and with information on the income of
the borrower at the time of mortgage origination EPCs in the UK rate properties from A (most
11 Available here 12 Data obtained here httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
D32 Technical Report on Market Needs and Gaps
1549
efficient) to G (least efficient) and provide information on the annual energy costs of a property
Properties are categorised into three buckets lsquoHigh energy efficiencyrsquo (EPC ratings of A B or C)
lsquoMedium energy efficiencyrsquo (EPC rating of D) and lsquoLow energy efficiencyrsquo (EPC ratings of E F or G) For
example the annual energy bill of a highly energy-efficient four-bedroomed house is on average GBP
1080 lower than for a four-bedroomed house with low energy efficiency
Table 3 Annual energy costs (in GBP) by type and energy efficiency of the property
Type of property High energy efficiency
Medium energy
efficiency
Low energy
efficiency
(EPC rating A-C) (EPC rating D) (EPC rating E-G)
2-bedroomed flat pound417 pound676 pound1023
3-bedroomed house pound578 pound891 pound1340
4-bedroomed house pound695 pound1130 pound1775
Source Bank Underground
By using univariate comparisons the study shows that about 093 of residential mortgages against
energy-efficient properties are in payment arrears This share is 021 percentage points lower than
the share of mortgages against energy-inefficient properties which is 114 This difference is
statistically significant at the one percent level In Figure 3 the black dot illustrates this difference
The black bar shows the 99 confidence interval
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency)
Source Bank Underground
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
249
Executive Summary
The first EeDaPP report - including a mapping exercise ndash which provided a detailed analysis of existing
green reporting criteria in the energy efficiency and buildings sectors allowed us to narrow down the
variables and define the list of criteria to underpin the data protocol The present report identifies
market gaps and needs in the Energy Efficient Mortgages (hereafter EEM) market with regard to
information and data gathering processing and disclosure
Gathering Market players generally and lending institutions in particular need to gather and
consolidate information coming from different sources of different natures and with several levels of
aggregation Moreover the implementation of the data gathering and reporting protocol must be
elaborated with the objective of optimisation and cost mutualisation for the EEM product and its
integration with IT systems already in place (ie integrate with existing reporting requirements and
practices minimise additional criteria)
Processing The EeDaPP initiative aims to provide relevant robust and reliable information to assess
EEM performance and risk evaluation The common database is an unprecedented collection of
reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
Disclosure The green bond market is growing rapidly and is key to the mobilisation of sustainable
investments As such it needs clear yet rigorous criteria for eligible assets for each key sector (new
and existing buildings in our case) and a harmonised and transparent reporting process aligned with
existing international standards regulatory developments and market best practices
To reach these objectives the EeDaPP initiative has to overcome the following gaps in the market
- Data availability issues at European and national levels regarding financial property valuation
and energy performance data
- Data consolidation harmonisation and comparability issues when processing information
coming from several data sources of different formats natures and calculation methods
- Data quality and representativeness issues for risk impact assessments
- Data monitoring issues especially regarding dynamic and evolving sustainability targets
criteria stringency and energy consumption reporting and monitoring
The ultimate objective of this work together with the previous publication (D31 ndash available here ) and
a final report (to be published in the future) is to elaborate a detailed and comprehensive list of energy
efficiency and performance criteria The full list of relevant data fields is to be collated in a reporting
protocol and common data portal which will allow the gathering processing and disclosur of relevant
information on Energy Efficient Mortgages across European markets
Source Activity WP3PU Editor L Bertalot (EMF-ECBC) Authors D Leboullenger J Johnson L Bertalot D Westig Status Final Date 30112018 Contractual Delivery Date M6
D32 Technical Report on Market Needs and Gaps
349
Table of Contents
1 INTRODUCTION 5
2 IDENTIFYING MARKET NEEDS 6
21 Gathering 6
211 Market needs Energy Efficient Mortgages framework and stakeholders 6
212 Existing reporting frameworks 8
22 Processing 14
221 Market needs Establish a direct link between loan level credit and mortgage risks
property valuation and energy performance 14
222 Existing studies on the link between the energy performance of buildings and mortgage
defaulthelliphelliphelliphelliphelliphellip 14
223 Reporting on the financial performance and related risk of Energy Efficiency
investments and energy upgrades 16
23 Disclosure 16
231 Market needs Provide the missing link from origination to funding 17
232 Impact reporting 18
233 Alignment with existing taxonomy international pledges and regulatory
developmentshelliphelliphelliphelliphelliphellip 20
3 ASSESS MARKET GAPS 25
31 Data Availability 25
311 Overall assessment 25
312 Energy performance data availability 25
313 Link between energy performance property valuation and mortgage data 29
32 Data Consolidation Comparability and Harmonisation Issues 30
321 Data consolidation and common key identifier 30
322 Harmonisation of the different methodologies and definitions 30
323 Calculation methods and comparability issues 32
33 Data Minimum Quality and Representativeness 35
331 Sampling problem coverage and data history 35
332 Lack of default data for the relevant period 36
34 Data Processing Monitoring and Usage 36
341 Privacy and contractual considerations 36
D32 Technical Report on Market Needs and Gaps
449
342 Practical issues Dynamic monitoring 38
343 Evolving sustainability targets 39
4 Conclusions and next steps 42
5 Annexes 43
51 List of figures and tables 43
52 EPC coverage 44
53 Data avaialbility Overall assessment 45
D32 Technical Report on Market Needs and Gaps
549
1 INTRODUCTION
The EeDaPP project seeks to provide a protocol and a technical solution for the design and use of a
Standardised Reporting Template and Common Data Portal for energy efficient mortgages and
assets This can be segmented into three key sections as illustrated in the figure below First EeDaPP
as an IT system solution proposes a reporting protocol to collect data and gather information on
energy efficient assets Second using the data collected provide a reliable database for the analysis
of the risk profile and performance of this new financial product and assess the statistical evidence
of the impact on energy performance on key mortgage indicators Loan to Value (LTV) Probability of
Default (PD) and Loss Given Default (LGD) Thirdly and finally the reporting protocol can be used to
disclose key features of Energy Efficient Assets to serve a potential certification or labelling process
to be used as an impact report for funding purposes and as empirical evidence for policy and
prudential purposes
Gathering
bullIT System solution to gather EEM data information and characteristics
bullReporting Criteria and Management Standardisation
Processing
bullEEM Performance and Risk Analysis ndash analyse and quantify the impact of energy efficiency on major risk indicators such as the impact on property value (LTV and LGD) and on the probability of default (PD)
Disclosure
bullOutput reporting for EEM certificationlabelling
bullImpact reporting for funding tools
bullStatistical evidence for empirical policy recommendations and prudential treatment of EEM
D32 Technical Report on Market Needs and Gaps
649
2 IDENTIFYING MARKET NEEDS
21 Gathering
Market needs to design a harmonised common data portal which market players generally and
lending institutions in particular need to gather and consolidate information coming from different
sources of different natures and with several levels of aggregation Moreover the implementation of
the data gathering and reporting protocol must be elaborated with the objective of optimisation and
cost mutualisation for the EEM product and its integration with IT systems already in place (ie
integrate with existing reporting requirements and practices minimise additional criteria)
211 Market needs Energy Efficient Mortgages framework and stakeholders
The EeDaPP initiative aims to develop reporting standards and design a common data portal for EEM
This implies gathering relevant information from several stakeholders The Energy Efficient Mortgage
market is complex as it involves numerous and diverse actors from both the public and the private
spheres on the retail and capital markets sides (see Figure 1)
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side
Source EeDaPP Consortium
The Energy Efficient Mortgage data reporting protocol is an integrated tool that gathers key data
and indicators from three different ldquolayersrdquo according to the sourcing and the use of the data
provided
EEM
Borrowers
Banks
Valuers
Public Authorities
SMEs
Technical Experts
EEM Portfolio
Investors
Capital Markets
Authorities
Certification Bodies
Rating Agengies
Internation-al pledges
on Paris Agreement
Green Bond
Issuers
D32 Technical Report on Market Needs and Gaps
749
Loan level (banks and borrowers) On the origination side borrowers are at the very beginning of the
value chain as they trigger the energy efficiency investment (either by buying a dwelling that is already
energy efficient or by undertaking energy upgrades on their property) These initial investors can be
real-estate companies (private or social housing funders) or households (that can be either private
landlords landlords in co-ownership or tenants) that become borrowers once they decide to finance
their project with bank lending and apply for financing via a loan or a mortgage from lending
institutions These lending institutions can be of several types private banks specialised banks or
public entities that operate with financial intermediaries Note that in some cases specific groups of
households can rely on specialised agencies1 such as credit assessors as a first point of contact Most
secured lending requires the gathering of information on both the status of the borrower herhis
creditworthiness determined by the lender and the quality of the underlying collateral The former is
derived directly from the borrower the latter is advised by a valuer or via an AVM (automated
valuation model) instructed by the lending institution The role of the valuer who is typically a
qualified professional operating in line with requirements laid down by their professional body is
normally to supply an estimate of the appraisal value of the asset as at the appraisal date of valuation
(Market Value - MV or Mortgage Lending Value - MLV) This value will determine the (current) Loan
to Value ratio which is determinant for the bank to assess the amount of the requested loan relative
to the value of the property
Asset level (energy performance of the building and energy efficiency upgrades) The value of the
property and selected features are assessed by valuers or valuation models The energy performance
of the property is assessed by technical experts who perform energy audits and deliver Energy
Performance Certificates (EPC) The energy performance assessment of the building can also be
inferred by hedonistic modelling (ie Automated Valuation Models) to obtain ldquotheoreticalrdquo EPC (see
the Dutch and Belgian cases cited later in this report) In most cases the energy efficient mortgage will
be granted for the purchase and subsequent energy efficient renovation of existing properties The
energy performance resulting from specific renovation works will be assessed andor certified through
building renovation roadmaps and involve the expertise of constructionbuilding actors
Portfolio level (EEM certification and labelling for funding purposes) Energy efficient mortgages
pooled in a portfolio can constitute a new kind of asset class that classifies EEM portfolios as a ldquo2deg
alignedrdquo (aligned with the COP21 Paris Agreement pledges to limit climate heat change to less than 2
degrees Celsius) or ldquogreenrdquo bond eligible To align with current market practices and upcoming
regulations and requirements covered bond and securitisation issuers will need to disclose specific
information relative to the alignment of the portfolio to sustainable goals and the ldquogreenrdquo taxonomy
in place (see more on this in Section 2 of the report) They are subject to second party opinions and
external ratings from specialised agencies and certification bodies Therefore there is a need for in-
depth and robust data on energy performance in order to ensure that European low carbon energy
1 In France or in Ireland for example specialised agencies (ANAH and SEAI) are providing funds and grants to fuel-poor households to refurbish their homes
D32 Technical Report on Market Needs and Gaps
849
transition targets set at national and international levels relative to energy consumption and the
carbon footprint of the residential sector are met
Table 1 Reporting ldquoLayersrdquo and information sources
Reporting ldquoLayerrdquo Datainformation source Aggregation Level
Financial reporting Mortgage Lending InstitutionData repositories
Loan level
Valuation reporting ValuerReal estate data providersLender PropertyIndividualloan level
Energy performance reporting
Energy AuditorsArchitectsBuilding performance logbookGreen building label certifiers
PropertyIndividual level
Impact reporting Funding instrument issuerSecond party opinionldquoGreen bondrdquo certification agencies
Portfolio aggregated and macro level
Source EeDaPP Consortium
212 Existing reporting frameworks
For time cost and resource optimisation purposes the EeDaPP initiative must build on all existing
reporting templates and framework to gather the relevant data on Energy Efficient Mortgages
To date there are several reporting methods andor databases in place regarding the information that
the EeDaPP data portal needs to collate such as on the financial performance of loans property
valuation data the energy performance of the building stock energy efficiency upgrades and relevant
public policies regarding energy efficiency and performance in European countries
Financial performance reporting
Regarding financial reporting there are already several mandatory and regulatory reporting
frameworks that mortgage lending institutions must comply with and use to deliver data to their
regulator for transparency and prudential risk monitoring exercises These frameworks are either
public or confidential and comprise mandatory or optional reporting variables They constitute the
foundation of the EeDaPP reporting protocol and requirements regarding mortgage related and loan
level financial data
D32 Technical Report on Market Needs and Gaps
949
Table 2 Existing Data Templates
By fulfilling their reporting duties for their financial review either at loan level or at portfolio level
lending institutions can rely on data providers and repositories
Data repositories are directly involved in the development of a standardised data platform for Energy
Efficient Mortgages because of their extensive experience in defining reporting criteria and formats
and due to their implicit existing and often long-standing relationships with data owners (or data
providers which provide the data on behalf of the owner) in other words banks This means they are
uniquely positioned to explain the benefits to their data owners of the provision of this data and to
actively encourage data owners to provide this data Data repositories are furthermore crucial in
promoting the availability of additional robust and reliable energy efficiency data related to
residential and commercial mortgage loans and related debt instruments to their extensive network
of users eg lenders issuers investors rating agencies and central banks etc2
Credit reference agencies or Credit bureaux in some countries are companies which store
consumersrsquo utilities payment data with the purpose of credit scoring and other services (for example
fraud prevention) According to an ACCIS survey conducted in 2018 countries where energy utilities
supply payment data are Austria the Czech Republic Denmark Germany Iceland Poland Romania
Spain Switzerland and the United Kingdom Many banks are already in a business relationship with
2 Members of the EeDaPP Consortium European DataWarehouse Hypoport TXS CRIF
Current existing data-templates
Description Link
STS Residential Draft Template
Regulation shall apply to securitisations entered into on or after 1 January 2019
httpswwwesmaeuropaeupolicy-activitiessecuritisation
European Central Bank (EDW) Templates
The loan-level reporting requirements started on 3 January 2013 for RMBS and on 1 March 2013 for CMBS
httpswwwecbeuropaeupaymcollloanleveltransmissionhtmlindexenhtml
Rating Agency Templates
Quite similar and recently in most cases very similar to ECB loan level template (see above)
Not public
HTT NTT Harmonised investor report (HTT) and national investor report (for Dutch issuers available on issuer-website)
httpswwwcoveredbondlabelcomissuersharmonised-transparency-template
DSA Dutch national standard for investor reports used for securitised transactions
httpswwwdutchsecuritisationnlinvestor-reporting
AnaCredit Regulation
Dataset containing detailed information on individual bank loans in the euro area
httpswwwecbeuropaeustatsmoney_credit_bankinganacredithtmlindexenhtml
Source EeDaPP Consortium
D32 Technical Report on Market Needs and Gaps
1049
credit reference agencies and therefore they could represent an option to access the payment data
and subsequently use payments as a proxy to calculate savings
Reporting of the property prices and valuations
Databases at property level on real estate prices and characteristics exist at national level but are
gathered and stored by different actors in different EU countries Access is made publicly available for
research and commercial purposes in some countries but not all (free access in the UK and
Netherlands for a fee in France etc)
Examples of (semi-) public registers
- Notary transaction databases (France Belgium)
- Real-estate data providers (the Netherlands)
- Public institutions (eg the Royal Mail in the United Kingdom)
Real-estate data providers are independent technology companies specialising in the statistical
analysis and valuation of real estate Such companies can perform Automated Valuation Models
(AVM) for valuation of individual homes Their services can be used by rating agencies mortgage
lenders investors intermediaries validation institutes housing corporations consumer
organisations real estate companies brokers government agencies and regulators The European
AVM Alliance (EAA) was launched as a pan-European initiative at the end of 2012 with its mission
being to promote and standardise the usage of AVMs resulting in a consistent approach to automated
valuations in Europe EAA members include Calcasa (the Netherlands) Hometrack (the United
Kingdom) Eiendomsverdi (Norway) Vaumlrderingsdata (Sweden) CRIF (Italy) Tinsa (Spain) On-Geo
(Germany and Austria)
Reporting and data tools on the energy performance of the building stock
EU Building Stock Observatory The European Commission and the Building Performance Institute
Europe (BPIE) launched its Building Stock Observatory3 in November 2016 This constitutes an existing
platform to monitor and assess the energy performance of the existing building stock across Europe
To do so it assesses improvements in the energy efficiency of buildings and the impact of these on the
actual energy consumption of the building sector overall The Observatory contains a database a data
mapper and provides factsheets tracking
- Energy efficiency levels in buildings in individual EU countries and across the EU as a whole
- Different certification schemes (EPCs and nearly Zero Energy Efficient Buildings - nZEBs4) and
how they are implemented in terms of the financing available for renovating buildings
3 httpseceuropaeuenergyeneubuildings 4 Nearly zero-energy buildings (nZEBs) have very high energy performance The low amount of energy that these buildings require comes mostly from renewable sources
D32 Technical Report on Market Needs and Gaps
1149
Energy poverty5 levels across the EU
Over recent years the BPIE contributed to the development of several tools within the framework of
EU-funded projects and more Among these the European project ZEBRA2020 was developed to
monitor the market uptake of nZEBs across Europe and covers seventeen European countries and
almost 90 of the European building stock (EU amp EEA) These countries have different climatic
conditions polices and economic capabilities The ZEBRA2020 data tool offers a user-friendly
presentation of indicators related to the overall building stock and to nZEB activities The first part of
the tool presents an overview of the current building stock including renovation and construction
and monitors Energy Performance Certificate (EPC) activities by country (focusing on the projectrsquos
target countries) The tool endeavours to overcome data gaps and provide comprehensive datasets
which support stakeholders in their efforts to consolidate the transition to an nZEB market The
second part of the tool determines relevant indicators of nZEB buildings constructed after 2010 in
selected European countries Furthermore it aims to provide information on best cases in Europe
thereby showing most recurring technologies materials and strategies towards the nZEB target The
tool distinguishes between residential and non-residential nZEB buildings and determines some of
the most significant indicators regarding energy performance passive and active solutions and
production of renewable energy
Reporting on energy efficiency upgrades
The De-risking Energy Efficiency Platform (DEEP)6 is an open source database for the monitoring and
benchmarking of energy efficiency investments that provides detailed analysis and evidence on the
performance of energy efficiency investments in both commercial and residential sectors to support
the assessment of the related benefits and financial risks The DEEP platform offers the following
services
- Key Figures Provides a quick overview of the buildings and industry projects in the DEEP
- Data Overview Provides a more comprehensive (but still aggregated) overview of the
energy efficiency projects in the DEEP
- Chart Views Allows the user to view and filter a number of predefined charts for buildings
and industry energy efficiency projects
- Add and Manage Projects Data providers can upload and manage data on their energy
efficiency projects
- Analysis Toolbox Allows users to create charts in a dynamic and highly customisable
manner
5 Energy poverty is a multi-dimensional concept based on several prices income housing and living condition indicators More information can be found here 6 httpsdeepeefigeu
D32 Technical Report on Market Needs and Gaps
1249
- Benchmark Projects Allows users to benchmark their own projects and portfolios of
projects against a selected group of reference projects from the DEEP database
The EEFIG DEEP platform reports key financial and energy indicators from over 5000 energy efficiency
projects in buildings including almost 2000 residential multi-family buildings financed and developed
between 2012 and 2016 The data on energy efficiency projects included in the DEEP has been
provided by public and private investment funds and financial institutions national and regional
authorities as well as energy efficiency solution providers Data is stored and managed at the
European Commission level within DG Energy
Building Typology and Energy Consumption data portal TABULA7 as part of the EU-funded research
projects (2009-2012) TABULA residential building typologies have been developed for 13 European
countries Each national typology consists of a classification scheme grouping buildings according to
their size age and further parameters and a set of exemplary buildings representing the building
types These have been published by the project partners in national Building Typology Brochures
written in their respective languages As a common element all brochures contain double page
ldquoBuilding Display Sheetsrdquo for all example buildings on which energy related features and the effects
of refurbishment measures are illustrated graphically With a view to exchanging information at
European level the TABULA WebTool provides an online calculation of the exemplary buildings from
all countries displaying their energy related features and the possible energy savings that could be
realised by implementing refurbishment measures The basis of the TABULA WebTool is a simple and
transparent reference procedure for calculating the energy need the energy use by energyware and
the energyware assessment (primary energy carbon dioxide costs) The tool also provides an
estimate of the energy savings per msup2 per year if the selected dwelling undergoes energy upgrades
(classified in three categories existing state usual refurbishment and advanced refurbishment)
Individual Building Renovation Roadmap (iBROAD) Building data passport (Logbook)8 The iBRoad
project works on developing an Individual Building Renovation Roadmap for single-family houses This
tool provides a customised renovation plan over a long-term period (10-20 years) The renovation
roadmap is combined with a building logbook a repository where all the buildingrsquos related information
can be stored and continuously updated The type of information stored in the logbook and its
functions can evolve over time and could range from energy production and consumption to
equipment maintenance as well as insurance property plans and obligations energy bills smart
meter data and links to available financing options for renovation projects (eg green loans
incentives tax credits) The logbook will collect and structure information in five modules (General
and administrative information Building construction information Building Energy Performance
Building Operation and Use and SMART information collected through information and
communication technologies (ICT) such as IoT - Internet of Things appliances)
7 httpwebtoolbuilding-typologyeupdfur 8 httpsibroad-projecteunewsthe-logbook-data-quest
D32 Technical Report on Market Needs and Gaps
1349
Within that project several regional initiatives were developed and should enter into operation soon
such as PORTAL CASA + in Portugal and the Woning Pass in the Flanders region (Belgium)9
Netherlands EPC open database On the website httpwwwenergielabelatlasnl all the EPCrsquos in
the Netherlands are publicly available This openly accessible register displays full coverage in energy
performance labels at building unit level based on either a theoretical EPC or effectively delivered
certificate The database also displays a breakdown of the labelled energy performance for each
designated area (at district levels) as well as the average EPC rank
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot
Source Energielabelatlas
Reporting on energy efficiency policies
IEA Building Energy Efficiency Database (BEEP) - discontinued The International Energy Agency
provides a database of all registered public policies regarding energy efficiency
httpswwwieaorgbeep It provides an overview analysis of each country and a detailed list of
existing building codes labels and incentives in place The last update of this database was is 2010
Odysee-MURE Policy database MURE (Mesures dUtilisation Rationnelle de lEnergie) provides
information on energy efficiency policies and measures that have been carried out in the Member
States of the European Union The information is accessible by query in the database10
9 Prototype Online Tool available here here and here 10 httpwwwmeasures-odyssee-mureeutopics-energy-efficiency-policyasp
D32 Technical Report on Market Needs and Gaps
1449
22 Processing
Market needs The EeDaPP initiative aims to provide relevant robust and reliable information to
assess EEM performance and risk evaluation The common database is an unprecedented collection
of reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
221 Market needs Establish a direct link between loan level credit and mortgage
risks property valuation and energy performance
The underlying business case of a future EEM product is that there is an impact of the energy
performance of a residential or a commercial building on the level of risk associated with the mortgage
financing the property and its energy efficiency Energy Efficient Mortgages are less risky to finance
and therefore less costly in capital at balance sheet level for the bank because both the property value
and the borrower risk profile are better compared to another loan all other things equal One of the
objectives of the EeDaPP initiative is to provide statistical evidence supporting this business case and
establishing a direct link between loan level credit and mortgage risks property valuation and energy
performance
The EeDaPP consortium partners are currently researching the correlation between energy efficiency
in buildings and the probability of default (PD) associated with the mortgage The research team is
currently investigating the Dutch residential market using European Data Warehouse loan data and
Dutch Energy Agency (RVO) data on energy performance using EPCs and their findings are to be
published in a later stage
222 Existing studies on the link between energy performance of buildings and
mortgage default
To date there exist very few research studies that investigate the relationship between energy
efficiency and default rates and those which do mainly focus on the United Statesrsquo (US) market The
main reason for this is that there is a significant lack of data available in Europe on both financial and
energy efficiency at loan level with a direct matching link (ie datasets that contain both energy and
financial loan level data)
Focussing on the European market a preliminary study11 published by Bank of England uses loan
performance data for residential mortgages in the entire UK (year-end 2017) matched with the energy
performance certificates (EPCs12) of the underlying properties and with information on the income of
the borrower at the time of mortgage origination EPCs in the UK rate properties from A (most
11 Available here 12 Data obtained here httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
D32 Technical Report on Market Needs and Gaps
1549
efficient) to G (least efficient) and provide information on the annual energy costs of a property
Properties are categorised into three buckets lsquoHigh energy efficiencyrsquo (EPC ratings of A B or C)
lsquoMedium energy efficiencyrsquo (EPC rating of D) and lsquoLow energy efficiencyrsquo (EPC ratings of E F or G) For
example the annual energy bill of a highly energy-efficient four-bedroomed house is on average GBP
1080 lower than for a four-bedroomed house with low energy efficiency
Table 3 Annual energy costs (in GBP) by type and energy efficiency of the property
Type of property High energy efficiency
Medium energy
efficiency
Low energy
efficiency
(EPC rating A-C) (EPC rating D) (EPC rating E-G)
2-bedroomed flat pound417 pound676 pound1023
3-bedroomed house pound578 pound891 pound1340
4-bedroomed house pound695 pound1130 pound1775
Source Bank Underground
By using univariate comparisons the study shows that about 093 of residential mortgages against
energy-efficient properties are in payment arrears This share is 021 percentage points lower than
the share of mortgages against energy-inefficient properties which is 114 This difference is
statistically significant at the one percent level In Figure 3 the black dot illustrates this difference
The black bar shows the 99 confidence interval
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency)
Source Bank Underground
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
349
Table of Contents
1 INTRODUCTION 5
2 IDENTIFYING MARKET NEEDS 6
21 Gathering 6
211 Market needs Energy Efficient Mortgages framework and stakeholders 6
212 Existing reporting frameworks 8
22 Processing 14
221 Market needs Establish a direct link between loan level credit and mortgage risks
property valuation and energy performance 14
222 Existing studies on the link between the energy performance of buildings and mortgage
defaulthelliphelliphelliphelliphelliphellip 14
223 Reporting on the financial performance and related risk of Energy Efficiency
investments and energy upgrades 16
23 Disclosure 16
231 Market needs Provide the missing link from origination to funding 17
232 Impact reporting 18
233 Alignment with existing taxonomy international pledges and regulatory
developmentshelliphelliphelliphelliphelliphellip 20
3 ASSESS MARKET GAPS 25
31 Data Availability 25
311 Overall assessment 25
312 Energy performance data availability 25
313 Link between energy performance property valuation and mortgage data 29
32 Data Consolidation Comparability and Harmonisation Issues 30
321 Data consolidation and common key identifier 30
322 Harmonisation of the different methodologies and definitions 30
323 Calculation methods and comparability issues 32
33 Data Minimum Quality and Representativeness 35
331 Sampling problem coverage and data history 35
332 Lack of default data for the relevant period 36
34 Data Processing Monitoring and Usage 36
341 Privacy and contractual considerations 36
D32 Technical Report on Market Needs and Gaps
449
342 Practical issues Dynamic monitoring 38
343 Evolving sustainability targets 39
4 Conclusions and next steps 42
5 Annexes 43
51 List of figures and tables 43
52 EPC coverage 44
53 Data avaialbility Overall assessment 45
D32 Technical Report on Market Needs and Gaps
549
1 INTRODUCTION
The EeDaPP project seeks to provide a protocol and a technical solution for the design and use of a
Standardised Reporting Template and Common Data Portal for energy efficient mortgages and
assets This can be segmented into three key sections as illustrated in the figure below First EeDaPP
as an IT system solution proposes a reporting protocol to collect data and gather information on
energy efficient assets Second using the data collected provide a reliable database for the analysis
of the risk profile and performance of this new financial product and assess the statistical evidence
of the impact on energy performance on key mortgage indicators Loan to Value (LTV) Probability of
Default (PD) and Loss Given Default (LGD) Thirdly and finally the reporting protocol can be used to
disclose key features of Energy Efficient Assets to serve a potential certification or labelling process
to be used as an impact report for funding purposes and as empirical evidence for policy and
prudential purposes
Gathering
bullIT System solution to gather EEM data information and characteristics
bullReporting Criteria and Management Standardisation
Processing
bullEEM Performance and Risk Analysis ndash analyse and quantify the impact of energy efficiency on major risk indicators such as the impact on property value (LTV and LGD) and on the probability of default (PD)
Disclosure
bullOutput reporting for EEM certificationlabelling
bullImpact reporting for funding tools
bullStatistical evidence for empirical policy recommendations and prudential treatment of EEM
D32 Technical Report on Market Needs and Gaps
649
2 IDENTIFYING MARKET NEEDS
21 Gathering
Market needs to design a harmonised common data portal which market players generally and
lending institutions in particular need to gather and consolidate information coming from different
sources of different natures and with several levels of aggregation Moreover the implementation of
the data gathering and reporting protocol must be elaborated with the objective of optimisation and
cost mutualisation for the EEM product and its integration with IT systems already in place (ie
integrate with existing reporting requirements and practices minimise additional criteria)
211 Market needs Energy Efficient Mortgages framework and stakeholders
The EeDaPP initiative aims to develop reporting standards and design a common data portal for EEM
This implies gathering relevant information from several stakeholders The Energy Efficient Mortgage
market is complex as it involves numerous and diverse actors from both the public and the private
spheres on the retail and capital markets sides (see Figure 1)
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side
Source EeDaPP Consortium
The Energy Efficient Mortgage data reporting protocol is an integrated tool that gathers key data
and indicators from three different ldquolayersrdquo according to the sourcing and the use of the data
provided
EEM
Borrowers
Banks
Valuers
Public Authorities
SMEs
Technical Experts
EEM Portfolio
Investors
Capital Markets
Authorities
Certification Bodies
Rating Agengies
Internation-al pledges
on Paris Agreement
Green Bond
Issuers
D32 Technical Report on Market Needs and Gaps
749
Loan level (banks and borrowers) On the origination side borrowers are at the very beginning of the
value chain as they trigger the energy efficiency investment (either by buying a dwelling that is already
energy efficient or by undertaking energy upgrades on their property) These initial investors can be
real-estate companies (private or social housing funders) or households (that can be either private
landlords landlords in co-ownership or tenants) that become borrowers once they decide to finance
their project with bank lending and apply for financing via a loan or a mortgage from lending
institutions These lending institutions can be of several types private banks specialised banks or
public entities that operate with financial intermediaries Note that in some cases specific groups of
households can rely on specialised agencies1 such as credit assessors as a first point of contact Most
secured lending requires the gathering of information on both the status of the borrower herhis
creditworthiness determined by the lender and the quality of the underlying collateral The former is
derived directly from the borrower the latter is advised by a valuer or via an AVM (automated
valuation model) instructed by the lending institution The role of the valuer who is typically a
qualified professional operating in line with requirements laid down by their professional body is
normally to supply an estimate of the appraisal value of the asset as at the appraisal date of valuation
(Market Value - MV or Mortgage Lending Value - MLV) This value will determine the (current) Loan
to Value ratio which is determinant for the bank to assess the amount of the requested loan relative
to the value of the property
Asset level (energy performance of the building and energy efficiency upgrades) The value of the
property and selected features are assessed by valuers or valuation models The energy performance
of the property is assessed by technical experts who perform energy audits and deliver Energy
Performance Certificates (EPC) The energy performance assessment of the building can also be
inferred by hedonistic modelling (ie Automated Valuation Models) to obtain ldquotheoreticalrdquo EPC (see
the Dutch and Belgian cases cited later in this report) In most cases the energy efficient mortgage will
be granted for the purchase and subsequent energy efficient renovation of existing properties The
energy performance resulting from specific renovation works will be assessed andor certified through
building renovation roadmaps and involve the expertise of constructionbuilding actors
Portfolio level (EEM certification and labelling for funding purposes) Energy efficient mortgages
pooled in a portfolio can constitute a new kind of asset class that classifies EEM portfolios as a ldquo2deg
alignedrdquo (aligned with the COP21 Paris Agreement pledges to limit climate heat change to less than 2
degrees Celsius) or ldquogreenrdquo bond eligible To align with current market practices and upcoming
regulations and requirements covered bond and securitisation issuers will need to disclose specific
information relative to the alignment of the portfolio to sustainable goals and the ldquogreenrdquo taxonomy
in place (see more on this in Section 2 of the report) They are subject to second party opinions and
external ratings from specialised agencies and certification bodies Therefore there is a need for in-
depth and robust data on energy performance in order to ensure that European low carbon energy
1 In France or in Ireland for example specialised agencies (ANAH and SEAI) are providing funds and grants to fuel-poor households to refurbish their homes
D32 Technical Report on Market Needs and Gaps
849
transition targets set at national and international levels relative to energy consumption and the
carbon footprint of the residential sector are met
Table 1 Reporting ldquoLayersrdquo and information sources
Reporting ldquoLayerrdquo Datainformation source Aggregation Level
Financial reporting Mortgage Lending InstitutionData repositories
Loan level
Valuation reporting ValuerReal estate data providersLender PropertyIndividualloan level
Energy performance reporting
Energy AuditorsArchitectsBuilding performance logbookGreen building label certifiers
PropertyIndividual level
Impact reporting Funding instrument issuerSecond party opinionldquoGreen bondrdquo certification agencies
Portfolio aggregated and macro level
Source EeDaPP Consortium
212 Existing reporting frameworks
For time cost and resource optimisation purposes the EeDaPP initiative must build on all existing
reporting templates and framework to gather the relevant data on Energy Efficient Mortgages
To date there are several reporting methods andor databases in place regarding the information that
the EeDaPP data portal needs to collate such as on the financial performance of loans property
valuation data the energy performance of the building stock energy efficiency upgrades and relevant
public policies regarding energy efficiency and performance in European countries
Financial performance reporting
Regarding financial reporting there are already several mandatory and regulatory reporting
frameworks that mortgage lending institutions must comply with and use to deliver data to their
regulator for transparency and prudential risk monitoring exercises These frameworks are either
public or confidential and comprise mandatory or optional reporting variables They constitute the
foundation of the EeDaPP reporting protocol and requirements regarding mortgage related and loan
level financial data
D32 Technical Report on Market Needs and Gaps
949
Table 2 Existing Data Templates
By fulfilling their reporting duties for their financial review either at loan level or at portfolio level
lending institutions can rely on data providers and repositories
Data repositories are directly involved in the development of a standardised data platform for Energy
Efficient Mortgages because of their extensive experience in defining reporting criteria and formats
and due to their implicit existing and often long-standing relationships with data owners (or data
providers which provide the data on behalf of the owner) in other words banks This means they are
uniquely positioned to explain the benefits to their data owners of the provision of this data and to
actively encourage data owners to provide this data Data repositories are furthermore crucial in
promoting the availability of additional robust and reliable energy efficiency data related to
residential and commercial mortgage loans and related debt instruments to their extensive network
of users eg lenders issuers investors rating agencies and central banks etc2
Credit reference agencies or Credit bureaux in some countries are companies which store
consumersrsquo utilities payment data with the purpose of credit scoring and other services (for example
fraud prevention) According to an ACCIS survey conducted in 2018 countries where energy utilities
supply payment data are Austria the Czech Republic Denmark Germany Iceland Poland Romania
Spain Switzerland and the United Kingdom Many banks are already in a business relationship with
2 Members of the EeDaPP Consortium European DataWarehouse Hypoport TXS CRIF
Current existing data-templates
Description Link
STS Residential Draft Template
Regulation shall apply to securitisations entered into on or after 1 January 2019
httpswwwesmaeuropaeupolicy-activitiessecuritisation
European Central Bank (EDW) Templates
The loan-level reporting requirements started on 3 January 2013 for RMBS and on 1 March 2013 for CMBS
httpswwwecbeuropaeupaymcollloanleveltransmissionhtmlindexenhtml
Rating Agency Templates
Quite similar and recently in most cases very similar to ECB loan level template (see above)
Not public
HTT NTT Harmonised investor report (HTT) and national investor report (for Dutch issuers available on issuer-website)
httpswwwcoveredbondlabelcomissuersharmonised-transparency-template
DSA Dutch national standard for investor reports used for securitised transactions
httpswwwdutchsecuritisationnlinvestor-reporting
AnaCredit Regulation
Dataset containing detailed information on individual bank loans in the euro area
httpswwwecbeuropaeustatsmoney_credit_bankinganacredithtmlindexenhtml
Source EeDaPP Consortium
D32 Technical Report on Market Needs and Gaps
1049
credit reference agencies and therefore they could represent an option to access the payment data
and subsequently use payments as a proxy to calculate savings
Reporting of the property prices and valuations
Databases at property level on real estate prices and characteristics exist at national level but are
gathered and stored by different actors in different EU countries Access is made publicly available for
research and commercial purposes in some countries but not all (free access in the UK and
Netherlands for a fee in France etc)
Examples of (semi-) public registers
- Notary transaction databases (France Belgium)
- Real-estate data providers (the Netherlands)
- Public institutions (eg the Royal Mail in the United Kingdom)
Real-estate data providers are independent technology companies specialising in the statistical
analysis and valuation of real estate Such companies can perform Automated Valuation Models
(AVM) for valuation of individual homes Their services can be used by rating agencies mortgage
lenders investors intermediaries validation institutes housing corporations consumer
organisations real estate companies brokers government agencies and regulators The European
AVM Alliance (EAA) was launched as a pan-European initiative at the end of 2012 with its mission
being to promote and standardise the usage of AVMs resulting in a consistent approach to automated
valuations in Europe EAA members include Calcasa (the Netherlands) Hometrack (the United
Kingdom) Eiendomsverdi (Norway) Vaumlrderingsdata (Sweden) CRIF (Italy) Tinsa (Spain) On-Geo
(Germany and Austria)
Reporting and data tools on the energy performance of the building stock
EU Building Stock Observatory The European Commission and the Building Performance Institute
Europe (BPIE) launched its Building Stock Observatory3 in November 2016 This constitutes an existing
platform to monitor and assess the energy performance of the existing building stock across Europe
To do so it assesses improvements in the energy efficiency of buildings and the impact of these on the
actual energy consumption of the building sector overall The Observatory contains a database a data
mapper and provides factsheets tracking
- Energy efficiency levels in buildings in individual EU countries and across the EU as a whole
- Different certification schemes (EPCs and nearly Zero Energy Efficient Buildings - nZEBs4) and
how they are implemented in terms of the financing available for renovating buildings
3 httpseceuropaeuenergyeneubuildings 4 Nearly zero-energy buildings (nZEBs) have very high energy performance The low amount of energy that these buildings require comes mostly from renewable sources
D32 Technical Report on Market Needs and Gaps
1149
Energy poverty5 levels across the EU
Over recent years the BPIE contributed to the development of several tools within the framework of
EU-funded projects and more Among these the European project ZEBRA2020 was developed to
monitor the market uptake of nZEBs across Europe and covers seventeen European countries and
almost 90 of the European building stock (EU amp EEA) These countries have different climatic
conditions polices and economic capabilities The ZEBRA2020 data tool offers a user-friendly
presentation of indicators related to the overall building stock and to nZEB activities The first part of
the tool presents an overview of the current building stock including renovation and construction
and monitors Energy Performance Certificate (EPC) activities by country (focusing on the projectrsquos
target countries) The tool endeavours to overcome data gaps and provide comprehensive datasets
which support stakeholders in their efforts to consolidate the transition to an nZEB market The
second part of the tool determines relevant indicators of nZEB buildings constructed after 2010 in
selected European countries Furthermore it aims to provide information on best cases in Europe
thereby showing most recurring technologies materials and strategies towards the nZEB target The
tool distinguishes between residential and non-residential nZEB buildings and determines some of
the most significant indicators regarding energy performance passive and active solutions and
production of renewable energy
Reporting on energy efficiency upgrades
The De-risking Energy Efficiency Platform (DEEP)6 is an open source database for the monitoring and
benchmarking of energy efficiency investments that provides detailed analysis and evidence on the
performance of energy efficiency investments in both commercial and residential sectors to support
the assessment of the related benefits and financial risks The DEEP platform offers the following
services
- Key Figures Provides a quick overview of the buildings and industry projects in the DEEP
- Data Overview Provides a more comprehensive (but still aggregated) overview of the
energy efficiency projects in the DEEP
- Chart Views Allows the user to view and filter a number of predefined charts for buildings
and industry energy efficiency projects
- Add and Manage Projects Data providers can upload and manage data on their energy
efficiency projects
- Analysis Toolbox Allows users to create charts in a dynamic and highly customisable
manner
5 Energy poverty is a multi-dimensional concept based on several prices income housing and living condition indicators More information can be found here 6 httpsdeepeefigeu
D32 Technical Report on Market Needs and Gaps
1249
- Benchmark Projects Allows users to benchmark their own projects and portfolios of
projects against a selected group of reference projects from the DEEP database
The EEFIG DEEP platform reports key financial and energy indicators from over 5000 energy efficiency
projects in buildings including almost 2000 residential multi-family buildings financed and developed
between 2012 and 2016 The data on energy efficiency projects included in the DEEP has been
provided by public and private investment funds and financial institutions national and regional
authorities as well as energy efficiency solution providers Data is stored and managed at the
European Commission level within DG Energy
Building Typology and Energy Consumption data portal TABULA7 as part of the EU-funded research
projects (2009-2012) TABULA residential building typologies have been developed for 13 European
countries Each national typology consists of a classification scheme grouping buildings according to
their size age and further parameters and a set of exemplary buildings representing the building
types These have been published by the project partners in national Building Typology Brochures
written in their respective languages As a common element all brochures contain double page
ldquoBuilding Display Sheetsrdquo for all example buildings on which energy related features and the effects
of refurbishment measures are illustrated graphically With a view to exchanging information at
European level the TABULA WebTool provides an online calculation of the exemplary buildings from
all countries displaying their energy related features and the possible energy savings that could be
realised by implementing refurbishment measures The basis of the TABULA WebTool is a simple and
transparent reference procedure for calculating the energy need the energy use by energyware and
the energyware assessment (primary energy carbon dioxide costs) The tool also provides an
estimate of the energy savings per msup2 per year if the selected dwelling undergoes energy upgrades
(classified in three categories existing state usual refurbishment and advanced refurbishment)
Individual Building Renovation Roadmap (iBROAD) Building data passport (Logbook)8 The iBRoad
project works on developing an Individual Building Renovation Roadmap for single-family houses This
tool provides a customised renovation plan over a long-term period (10-20 years) The renovation
roadmap is combined with a building logbook a repository where all the buildingrsquos related information
can be stored and continuously updated The type of information stored in the logbook and its
functions can evolve over time and could range from energy production and consumption to
equipment maintenance as well as insurance property plans and obligations energy bills smart
meter data and links to available financing options for renovation projects (eg green loans
incentives tax credits) The logbook will collect and structure information in five modules (General
and administrative information Building construction information Building Energy Performance
Building Operation and Use and SMART information collected through information and
communication technologies (ICT) such as IoT - Internet of Things appliances)
7 httpwebtoolbuilding-typologyeupdfur 8 httpsibroad-projecteunewsthe-logbook-data-quest
D32 Technical Report on Market Needs and Gaps
1349
Within that project several regional initiatives were developed and should enter into operation soon
such as PORTAL CASA + in Portugal and the Woning Pass in the Flanders region (Belgium)9
Netherlands EPC open database On the website httpwwwenergielabelatlasnl all the EPCrsquos in
the Netherlands are publicly available This openly accessible register displays full coverage in energy
performance labels at building unit level based on either a theoretical EPC or effectively delivered
certificate The database also displays a breakdown of the labelled energy performance for each
designated area (at district levels) as well as the average EPC rank
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot
Source Energielabelatlas
Reporting on energy efficiency policies
IEA Building Energy Efficiency Database (BEEP) - discontinued The International Energy Agency
provides a database of all registered public policies regarding energy efficiency
httpswwwieaorgbeep It provides an overview analysis of each country and a detailed list of
existing building codes labels and incentives in place The last update of this database was is 2010
Odysee-MURE Policy database MURE (Mesures dUtilisation Rationnelle de lEnergie) provides
information on energy efficiency policies and measures that have been carried out in the Member
States of the European Union The information is accessible by query in the database10
9 Prototype Online Tool available here here and here 10 httpwwwmeasures-odyssee-mureeutopics-energy-efficiency-policyasp
D32 Technical Report on Market Needs and Gaps
1449
22 Processing
Market needs The EeDaPP initiative aims to provide relevant robust and reliable information to
assess EEM performance and risk evaluation The common database is an unprecedented collection
of reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
221 Market needs Establish a direct link between loan level credit and mortgage
risks property valuation and energy performance
The underlying business case of a future EEM product is that there is an impact of the energy
performance of a residential or a commercial building on the level of risk associated with the mortgage
financing the property and its energy efficiency Energy Efficient Mortgages are less risky to finance
and therefore less costly in capital at balance sheet level for the bank because both the property value
and the borrower risk profile are better compared to another loan all other things equal One of the
objectives of the EeDaPP initiative is to provide statistical evidence supporting this business case and
establishing a direct link between loan level credit and mortgage risks property valuation and energy
performance
The EeDaPP consortium partners are currently researching the correlation between energy efficiency
in buildings and the probability of default (PD) associated with the mortgage The research team is
currently investigating the Dutch residential market using European Data Warehouse loan data and
Dutch Energy Agency (RVO) data on energy performance using EPCs and their findings are to be
published in a later stage
222 Existing studies on the link between energy performance of buildings and
mortgage default
To date there exist very few research studies that investigate the relationship between energy
efficiency and default rates and those which do mainly focus on the United Statesrsquo (US) market The
main reason for this is that there is a significant lack of data available in Europe on both financial and
energy efficiency at loan level with a direct matching link (ie datasets that contain both energy and
financial loan level data)
Focussing on the European market a preliminary study11 published by Bank of England uses loan
performance data for residential mortgages in the entire UK (year-end 2017) matched with the energy
performance certificates (EPCs12) of the underlying properties and with information on the income of
the borrower at the time of mortgage origination EPCs in the UK rate properties from A (most
11 Available here 12 Data obtained here httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
D32 Technical Report on Market Needs and Gaps
1549
efficient) to G (least efficient) and provide information on the annual energy costs of a property
Properties are categorised into three buckets lsquoHigh energy efficiencyrsquo (EPC ratings of A B or C)
lsquoMedium energy efficiencyrsquo (EPC rating of D) and lsquoLow energy efficiencyrsquo (EPC ratings of E F or G) For
example the annual energy bill of a highly energy-efficient four-bedroomed house is on average GBP
1080 lower than for a four-bedroomed house with low energy efficiency
Table 3 Annual energy costs (in GBP) by type and energy efficiency of the property
Type of property High energy efficiency
Medium energy
efficiency
Low energy
efficiency
(EPC rating A-C) (EPC rating D) (EPC rating E-G)
2-bedroomed flat pound417 pound676 pound1023
3-bedroomed house pound578 pound891 pound1340
4-bedroomed house pound695 pound1130 pound1775
Source Bank Underground
By using univariate comparisons the study shows that about 093 of residential mortgages against
energy-efficient properties are in payment arrears This share is 021 percentage points lower than
the share of mortgages against energy-inefficient properties which is 114 This difference is
statistically significant at the one percent level In Figure 3 the black dot illustrates this difference
The black bar shows the 99 confidence interval
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency)
Source Bank Underground
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
449
342 Practical issues Dynamic monitoring 38
343 Evolving sustainability targets 39
4 Conclusions and next steps 42
5 Annexes 43
51 List of figures and tables 43
52 EPC coverage 44
53 Data avaialbility Overall assessment 45
D32 Technical Report on Market Needs and Gaps
549
1 INTRODUCTION
The EeDaPP project seeks to provide a protocol and a technical solution for the design and use of a
Standardised Reporting Template and Common Data Portal for energy efficient mortgages and
assets This can be segmented into three key sections as illustrated in the figure below First EeDaPP
as an IT system solution proposes a reporting protocol to collect data and gather information on
energy efficient assets Second using the data collected provide a reliable database for the analysis
of the risk profile and performance of this new financial product and assess the statistical evidence
of the impact on energy performance on key mortgage indicators Loan to Value (LTV) Probability of
Default (PD) and Loss Given Default (LGD) Thirdly and finally the reporting protocol can be used to
disclose key features of Energy Efficient Assets to serve a potential certification or labelling process
to be used as an impact report for funding purposes and as empirical evidence for policy and
prudential purposes
Gathering
bullIT System solution to gather EEM data information and characteristics
bullReporting Criteria and Management Standardisation
Processing
bullEEM Performance and Risk Analysis ndash analyse and quantify the impact of energy efficiency on major risk indicators such as the impact on property value (LTV and LGD) and on the probability of default (PD)
Disclosure
bullOutput reporting for EEM certificationlabelling
bullImpact reporting for funding tools
bullStatistical evidence for empirical policy recommendations and prudential treatment of EEM
D32 Technical Report on Market Needs and Gaps
649
2 IDENTIFYING MARKET NEEDS
21 Gathering
Market needs to design a harmonised common data portal which market players generally and
lending institutions in particular need to gather and consolidate information coming from different
sources of different natures and with several levels of aggregation Moreover the implementation of
the data gathering and reporting protocol must be elaborated with the objective of optimisation and
cost mutualisation for the EEM product and its integration with IT systems already in place (ie
integrate with existing reporting requirements and practices minimise additional criteria)
211 Market needs Energy Efficient Mortgages framework and stakeholders
The EeDaPP initiative aims to develop reporting standards and design a common data portal for EEM
This implies gathering relevant information from several stakeholders The Energy Efficient Mortgage
market is complex as it involves numerous and diverse actors from both the public and the private
spheres on the retail and capital markets sides (see Figure 1)
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side
Source EeDaPP Consortium
The Energy Efficient Mortgage data reporting protocol is an integrated tool that gathers key data
and indicators from three different ldquolayersrdquo according to the sourcing and the use of the data
provided
EEM
Borrowers
Banks
Valuers
Public Authorities
SMEs
Technical Experts
EEM Portfolio
Investors
Capital Markets
Authorities
Certification Bodies
Rating Agengies
Internation-al pledges
on Paris Agreement
Green Bond
Issuers
D32 Technical Report on Market Needs and Gaps
749
Loan level (banks and borrowers) On the origination side borrowers are at the very beginning of the
value chain as they trigger the energy efficiency investment (either by buying a dwelling that is already
energy efficient or by undertaking energy upgrades on their property) These initial investors can be
real-estate companies (private or social housing funders) or households (that can be either private
landlords landlords in co-ownership or tenants) that become borrowers once they decide to finance
their project with bank lending and apply for financing via a loan or a mortgage from lending
institutions These lending institutions can be of several types private banks specialised banks or
public entities that operate with financial intermediaries Note that in some cases specific groups of
households can rely on specialised agencies1 such as credit assessors as a first point of contact Most
secured lending requires the gathering of information on both the status of the borrower herhis
creditworthiness determined by the lender and the quality of the underlying collateral The former is
derived directly from the borrower the latter is advised by a valuer or via an AVM (automated
valuation model) instructed by the lending institution The role of the valuer who is typically a
qualified professional operating in line with requirements laid down by their professional body is
normally to supply an estimate of the appraisal value of the asset as at the appraisal date of valuation
(Market Value - MV or Mortgage Lending Value - MLV) This value will determine the (current) Loan
to Value ratio which is determinant for the bank to assess the amount of the requested loan relative
to the value of the property
Asset level (energy performance of the building and energy efficiency upgrades) The value of the
property and selected features are assessed by valuers or valuation models The energy performance
of the property is assessed by technical experts who perform energy audits and deliver Energy
Performance Certificates (EPC) The energy performance assessment of the building can also be
inferred by hedonistic modelling (ie Automated Valuation Models) to obtain ldquotheoreticalrdquo EPC (see
the Dutch and Belgian cases cited later in this report) In most cases the energy efficient mortgage will
be granted for the purchase and subsequent energy efficient renovation of existing properties The
energy performance resulting from specific renovation works will be assessed andor certified through
building renovation roadmaps and involve the expertise of constructionbuilding actors
Portfolio level (EEM certification and labelling for funding purposes) Energy efficient mortgages
pooled in a portfolio can constitute a new kind of asset class that classifies EEM portfolios as a ldquo2deg
alignedrdquo (aligned with the COP21 Paris Agreement pledges to limit climate heat change to less than 2
degrees Celsius) or ldquogreenrdquo bond eligible To align with current market practices and upcoming
regulations and requirements covered bond and securitisation issuers will need to disclose specific
information relative to the alignment of the portfolio to sustainable goals and the ldquogreenrdquo taxonomy
in place (see more on this in Section 2 of the report) They are subject to second party opinions and
external ratings from specialised agencies and certification bodies Therefore there is a need for in-
depth and robust data on energy performance in order to ensure that European low carbon energy
1 In France or in Ireland for example specialised agencies (ANAH and SEAI) are providing funds and grants to fuel-poor households to refurbish their homes
D32 Technical Report on Market Needs and Gaps
849
transition targets set at national and international levels relative to energy consumption and the
carbon footprint of the residential sector are met
Table 1 Reporting ldquoLayersrdquo and information sources
Reporting ldquoLayerrdquo Datainformation source Aggregation Level
Financial reporting Mortgage Lending InstitutionData repositories
Loan level
Valuation reporting ValuerReal estate data providersLender PropertyIndividualloan level
Energy performance reporting
Energy AuditorsArchitectsBuilding performance logbookGreen building label certifiers
PropertyIndividual level
Impact reporting Funding instrument issuerSecond party opinionldquoGreen bondrdquo certification agencies
Portfolio aggregated and macro level
Source EeDaPP Consortium
212 Existing reporting frameworks
For time cost and resource optimisation purposes the EeDaPP initiative must build on all existing
reporting templates and framework to gather the relevant data on Energy Efficient Mortgages
To date there are several reporting methods andor databases in place regarding the information that
the EeDaPP data portal needs to collate such as on the financial performance of loans property
valuation data the energy performance of the building stock energy efficiency upgrades and relevant
public policies regarding energy efficiency and performance in European countries
Financial performance reporting
Regarding financial reporting there are already several mandatory and regulatory reporting
frameworks that mortgage lending institutions must comply with and use to deliver data to their
regulator for transparency and prudential risk monitoring exercises These frameworks are either
public or confidential and comprise mandatory or optional reporting variables They constitute the
foundation of the EeDaPP reporting protocol and requirements regarding mortgage related and loan
level financial data
D32 Technical Report on Market Needs and Gaps
949
Table 2 Existing Data Templates
By fulfilling their reporting duties for their financial review either at loan level or at portfolio level
lending institutions can rely on data providers and repositories
Data repositories are directly involved in the development of a standardised data platform for Energy
Efficient Mortgages because of their extensive experience in defining reporting criteria and formats
and due to their implicit existing and often long-standing relationships with data owners (or data
providers which provide the data on behalf of the owner) in other words banks This means they are
uniquely positioned to explain the benefits to their data owners of the provision of this data and to
actively encourage data owners to provide this data Data repositories are furthermore crucial in
promoting the availability of additional robust and reliable energy efficiency data related to
residential and commercial mortgage loans and related debt instruments to their extensive network
of users eg lenders issuers investors rating agencies and central banks etc2
Credit reference agencies or Credit bureaux in some countries are companies which store
consumersrsquo utilities payment data with the purpose of credit scoring and other services (for example
fraud prevention) According to an ACCIS survey conducted in 2018 countries where energy utilities
supply payment data are Austria the Czech Republic Denmark Germany Iceland Poland Romania
Spain Switzerland and the United Kingdom Many banks are already in a business relationship with
2 Members of the EeDaPP Consortium European DataWarehouse Hypoport TXS CRIF
Current existing data-templates
Description Link
STS Residential Draft Template
Regulation shall apply to securitisations entered into on or after 1 January 2019
httpswwwesmaeuropaeupolicy-activitiessecuritisation
European Central Bank (EDW) Templates
The loan-level reporting requirements started on 3 January 2013 for RMBS and on 1 March 2013 for CMBS
httpswwwecbeuropaeupaymcollloanleveltransmissionhtmlindexenhtml
Rating Agency Templates
Quite similar and recently in most cases very similar to ECB loan level template (see above)
Not public
HTT NTT Harmonised investor report (HTT) and national investor report (for Dutch issuers available on issuer-website)
httpswwwcoveredbondlabelcomissuersharmonised-transparency-template
DSA Dutch national standard for investor reports used for securitised transactions
httpswwwdutchsecuritisationnlinvestor-reporting
AnaCredit Regulation
Dataset containing detailed information on individual bank loans in the euro area
httpswwwecbeuropaeustatsmoney_credit_bankinganacredithtmlindexenhtml
Source EeDaPP Consortium
D32 Technical Report on Market Needs and Gaps
1049
credit reference agencies and therefore they could represent an option to access the payment data
and subsequently use payments as a proxy to calculate savings
Reporting of the property prices and valuations
Databases at property level on real estate prices and characteristics exist at national level but are
gathered and stored by different actors in different EU countries Access is made publicly available for
research and commercial purposes in some countries but not all (free access in the UK and
Netherlands for a fee in France etc)
Examples of (semi-) public registers
- Notary transaction databases (France Belgium)
- Real-estate data providers (the Netherlands)
- Public institutions (eg the Royal Mail in the United Kingdom)
Real-estate data providers are independent technology companies specialising in the statistical
analysis and valuation of real estate Such companies can perform Automated Valuation Models
(AVM) for valuation of individual homes Their services can be used by rating agencies mortgage
lenders investors intermediaries validation institutes housing corporations consumer
organisations real estate companies brokers government agencies and regulators The European
AVM Alliance (EAA) was launched as a pan-European initiative at the end of 2012 with its mission
being to promote and standardise the usage of AVMs resulting in a consistent approach to automated
valuations in Europe EAA members include Calcasa (the Netherlands) Hometrack (the United
Kingdom) Eiendomsverdi (Norway) Vaumlrderingsdata (Sweden) CRIF (Italy) Tinsa (Spain) On-Geo
(Germany and Austria)
Reporting and data tools on the energy performance of the building stock
EU Building Stock Observatory The European Commission and the Building Performance Institute
Europe (BPIE) launched its Building Stock Observatory3 in November 2016 This constitutes an existing
platform to monitor and assess the energy performance of the existing building stock across Europe
To do so it assesses improvements in the energy efficiency of buildings and the impact of these on the
actual energy consumption of the building sector overall The Observatory contains a database a data
mapper and provides factsheets tracking
- Energy efficiency levels in buildings in individual EU countries and across the EU as a whole
- Different certification schemes (EPCs and nearly Zero Energy Efficient Buildings - nZEBs4) and
how they are implemented in terms of the financing available for renovating buildings
3 httpseceuropaeuenergyeneubuildings 4 Nearly zero-energy buildings (nZEBs) have very high energy performance The low amount of energy that these buildings require comes mostly from renewable sources
D32 Technical Report on Market Needs and Gaps
1149
Energy poverty5 levels across the EU
Over recent years the BPIE contributed to the development of several tools within the framework of
EU-funded projects and more Among these the European project ZEBRA2020 was developed to
monitor the market uptake of nZEBs across Europe and covers seventeen European countries and
almost 90 of the European building stock (EU amp EEA) These countries have different climatic
conditions polices and economic capabilities The ZEBRA2020 data tool offers a user-friendly
presentation of indicators related to the overall building stock and to nZEB activities The first part of
the tool presents an overview of the current building stock including renovation and construction
and monitors Energy Performance Certificate (EPC) activities by country (focusing on the projectrsquos
target countries) The tool endeavours to overcome data gaps and provide comprehensive datasets
which support stakeholders in their efforts to consolidate the transition to an nZEB market The
second part of the tool determines relevant indicators of nZEB buildings constructed after 2010 in
selected European countries Furthermore it aims to provide information on best cases in Europe
thereby showing most recurring technologies materials and strategies towards the nZEB target The
tool distinguishes between residential and non-residential nZEB buildings and determines some of
the most significant indicators regarding energy performance passive and active solutions and
production of renewable energy
Reporting on energy efficiency upgrades
The De-risking Energy Efficiency Platform (DEEP)6 is an open source database for the monitoring and
benchmarking of energy efficiency investments that provides detailed analysis and evidence on the
performance of energy efficiency investments in both commercial and residential sectors to support
the assessment of the related benefits and financial risks The DEEP platform offers the following
services
- Key Figures Provides a quick overview of the buildings and industry projects in the DEEP
- Data Overview Provides a more comprehensive (but still aggregated) overview of the
energy efficiency projects in the DEEP
- Chart Views Allows the user to view and filter a number of predefined charts for buildings
and industry energy efficiency projects
- Add and Manage Projects Data providers can upload and manage data on their energy
efficiency projects
- Analysis Toolbox Allows users to create charts in a dynamic and highly customisable
manner
5 Energy poverty is a multi-dimensional concept based on several prices income housing and living condition indicators More information can be found here 6 httpsdeepeefigeu
D32 Technical Report on Market Needs and Gaps
1249
- Benchmark Projects Allows users to benchmark their own projects and portfolios of
projects against a selected group of reference projects from the DEEP database
The EEFIG DEEP platform reports key financial and energy indicators from over 5000 energy efficiency
projects in buildings including almost 2000 residential multi-family buildings financed and developed
between 2012 and 2016 The data on energy efficiency projects included in the DEEP has been
provided by public and private investment funds and financial institutions national and regional
authorities as well as energy efficiency solution providers Data is stored and managed at the
European Commission level within DG Energy
Building Typology and Energy Consumption data portal TABULA7 as part of the EU-funded research
projects (2009-2012) TABULA residential building typologies have been developed for 13 European
countries Each national typology consists of a classification scheme grouping buildings according to
their size age and further parameters and a set of exemplary buildings representing the building
types These have been published by the project partners in national Building Typology Brochures
written in their respective languages As a common element all brochures contain double page
ldquoBuilding Display Sheetsrdquo for all example buildings on which energy related features and the effects
of refurbishment measures are illustrated graphically With a view to exchanging information at
European level the TABULA WebTool provides an online calculation of the exemplary buildings from
all countries displaying their energy related features and the possible energy savings that could be
realised by implementing refurbishment measures The basis of the TABULA WebTool is a simple and
transparent reference procedure for calculating the energy need the energy use by energyware and
the energyware assessment (primary energy carbon dioxide costs) The tool also provides an
estimate of the energy savings per msup2 per year if the selected dwelling undergoes energy upgrades
(classified in three categories existing state usual refurbishment and advanced refurbishment)
Individual Building Renovation Roadmap (iBROAD) Building data passport (Logbook)8 The iBRoad
project works on developing an Individual Building Renovation Roadmap for single-family houses This
tool provides a customised renovation plan over a long-term period (10-20 years) The renovation
roadmap is combined with a building logbook a repository where all the buildingrsquos related information
can be stored and continuously updated The type of information stored in the logbook and its
functions can evolve over time and could range from energy production and consumption to
equipment maintenance as well as insurance property plans and obligations energy bills smart
meter data and links to available financing options for renovation projects (eg green loans
incentives tax credits) The logbook will collect and structure information in five modules (General
and administrative information Building construction information Building Energy Performance
Building Operation and Use and SMART information collected through information and
communication technologies (ICT) such as IoT - Internet of Things appliances)
7 httpwebtoolbuilding-typologyeupdfur 8 httpsibroad-projecteunewsthe-logbook-data-quest
D32 Technical Report on Market Needs and Gaps
1349
Within that project several regional initiatives were developed and should enter into operation soon
such as PORTAL CASA + in Portugal and the Woning Pass in the Flanders region (Belgium)9
Netherlands EPC open database On the website httpwwwenergielabelatlasnl all the EPCrsquos in
the Netherlands are publicly available This openly accessible register displays full coverage in energy
performance labels at building unit level based on either a theoretical EPC or effectively delivered
certificate The database also displays a breakdown of the labelled energy performance for each
designated area (at district levels) as well as the average EPC rank
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot
Source Energielabelatlas
Reporting on energy efficiency policies
IEA Building Energy Efficiency Database (BEEP) - discontinued The International Energy Agency
provides a database of all registered public policies regarding energy efficiency
httpswwwieaorgbeep It provides an overview analysis of each country and a detailed list of
existing building codes labels and incentives in place The last update of this database was is 2010
Odysee-MURE Policy database MURE (Mesures dUtilisation Rationnelle de lEnergie) provides
information on energy efficiency policies and measures that have been carried out in the Member
States of the European Union The information is accessible by query in the database10
9 Prototype Online Tool available here here and here 10 httpwwwmeasures-odyssee-mureeutopics-energy-efficiency-policyasp
D32 Technical Report on Market Needs and Gaps
1449
22 Processing
Market needs The EeDaPP initiative aims to provide relevant robust and reliable information to
assess EEM performance and risk evaluation The common database is an unprecedented collection
of reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
221 Market needs Establish a direct link between loan level credit and mortgage
risks property valuation and energy performance
The underlying business case of a future EEM product is that there is an impact of the energy
performance of a residential or a commercial building on the level of risk associated with the mortgage
financing the property and its energy efficiency Energy Efficient Mortgages are less risky to finance
and therefore less costly in capital at balance sheet level for the bank because both the property value
and the borrower risk profile are better compared to another loan all other things equal One of the
objectives of the EeDaPP initiative is to provide statistical evidence supporting this business case and
establishing a direct link between loan level credit and mortgage risks property valuation and energy
performance
The EeDaPP consortium partners are currently researching the correlation between energy efficiency
in buildings and the probability of default (PD) associated with the mortgage The research team is
currently investigating the Dutch residential market using European Data Warehouse loan data and
Dutch Energy Agency (RVO) data on energy performance using EPCs and their findings are to be
published in a later stage
222 Existing studies on the link between energy performance of buildings and
mortgage default
To date there exist very few research studies that investigate the relationship between energy
efficiency and default rates and those which do mainly focus on the United Statesrsquo (US) market The
main reason for this is that there is a significant lack of data available in Europe on both financial and
energy efficiency at loan level with a direct matching link (ie datasets that contain both energy and
financial loan level data)
Focussing on the European market a preliminary study11 published by Bank of England uses loan
performance data for residential mortgages in the entire UK (year-end 2017) matched with the energy
performance certificates (EPCs12) of the underlying properties and with information on the income of
the borrower at the time of mortgage origination EPCs in the UK rate properties from A (most
11 Available here 12 Data obtained here httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
D32 Technical Report on Market Needs and Gaps
1549
efficient) to G (least efficient) and provide information on the annual energy costs of a property
Properties are categorised into three buckets lsquoHigh energy efficiencyrsquo (EPC ratings of A B or C)
lsquoMedium energy efficiencyrsquo (EPC rating of D) and lsquoLow energy efficiencyrsquo (EPC ratings of E F or G) For
example the annual energy bill of a highly energy-efficient four-bedroomed house is on average GBP
1080 lower than for a four-bedroomed house with low energy efficiency
Table 3 Annual energy costs (in GBP) by type and energy efficiency of the property
Type of property High energy efficiency
Medium energy
efficiency
Low energy
efficiency
(EPC rating A-C) (EPC rating D) (EPC rating E-G)
2-bedroomed flat pound417 pound676 pound1023
3-bedroomed house pound578 pound891 pound1340
4-bedroomed house pound695 pound1130 pound1775
Source Bank Underground
By using univariate comparisons the study shows that about 093 of residential mortgages against
energy-efficient properties are in payment arrears This share is 021 percentage points lower than
the share of mortgages against energy-inefficient properties which is 114 This difference is
statistically significant at the one percent level In Figure 3 the black dot illustrates this difference
The black bar shows the 99 confidence interval
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency)
Source Bank Underground
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
549
1 INTRODUCTION
The EeDaPP project seeks to provide a protocol and a technical solution for the design and use of a
Standardised Reporting Template and Common Data Portal for energy efficient mortgages and
assets This can be segmented into three key sections as illustrated in the figure below First EeDaPP
as an IT system solution proposes a reporting protocol to collect data and gather information on
energy efficient assets Second using the data collected provide a reliable database for the analysis
of the risk profile and performance of this new financial product and assess the statistical evidence
of the impact on energy performance on key mortgage indicators Loan to Value (LTV) Probability of
Default (PD) and Loss Given Default (LGD) Thirdly and finally the reporting protocol can be used to
disclose key features of Energy Efficient Assets to serve a potential certification or labelling process
to be used as an impact report for funding purposes and as empirical evidence for policy and
prudential purposes
Gathering
bullIT System solution to gather EEM data information and characteristics
bullReporting Criteria and Management Standardisation
Processing
bullEEM Performance and Risk Analysis ndash analyse and quantify the impact of energy efficiency on major risk indicators such as the impact on property value (LTV and LGD) and on the probability of default (PD)
Disclosure
bullOutput reporting for EEM certificationlabelling
bullImpact reporting for funding tools
bullStatistical evidence for empirical policy recommendations and prudential treatment of EEM
D32 Technical Report on Market Needs and Gaps
649
2 IDENTIFYING MARKET NEEDS
21 Gathering
Market needs to design a harmonised common data portal which market players generally and
lending institutions in particular need to gather and consolidate information coming from different
sources of different natures and with several levels of aggregation Moreover the implementation of
the data gathering and reporting protocol must be elaborated with the objective of optimisation and
cost mutualisation for the EEM product and its integration with IT systems already in place (ie
integrate with existing reporting requirements and practices minimise additional criteria)
211 Market needs Energy Efficient Mortgages framework and stakeholders
The EeDaPP initiative aims to develop reporting standards and design a common data portal for EEM
This implies gathering relevant information from several stakeholders The Energy Efficient Mortgage
market is complex as it involves numerous and diverse actors from both the public and the private
spheres on the retail and capital markets sides (see Figure 1)
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side
Source EeDaPP Consortium
The Energy Efficient Mortgage data reporting protocol is an integrated tool that gathers key data
and indicators from three different ldquolayersrdquo according to the sourcing and the use of the data
provided
EEM
Borrowers
Banks
Valuers
Public Authorities
SMEs
Technical Experts
EEM Portfolio
Investors
Capital Markets
Authorities
Certification Bodies
Rating Agengies
Internation-al pledges
on Paris Agreement
Green Bond
Issuers
D32 Technical Report on Market Needs and Gaps
749
Loan level (banks and borrowers) On the origination side borrowers are at the very beginning of the
value chain as they trigger the energy efficiency investment (either by buying a dwelling that is already
energy efficient or by undertaking energy upgrades on their property) These initial investors can be
real-estate companies (private or social housing funders) or households (that can be either private
landlords landlords in co-ownership or tenants) that become borrowers once they decide to finance
their project with bank lending and apply for financing via a loan or a mortgage from lending
institutions These lending institutions can be of several types private banks specialised banks or
public entities that operate with financial intermediaries Note that in some cases specific groups of
households can rely on specialised agencies1 such as credit assessors as a first point of contact Most
secured lending requires the gathering of information on both the status of the borrower herhis
creditworthiness determined by the lender and the quality of the underlying collateral The former is
derived directly from the borrower the latter is advised by a valuer or via an AVM (automated
valuation model) instructed by the lending institution The role of the valuer who is typically a
qualified professional operating in line with requirements laid down by their professional body is
normally to supply an estimate of the appraisal value of the asset as at the appraisal date of valuation
(Market Value - MV or Mortgage Lending Value - MLV) This value will determine the (current) Loan
to Value ratio which is determinant for the bank to assess the amount of the requested loan relative
to the value of the property
Asset level (energy performance of the building and energy efficiency upgrades) The value of the
property and selected features are assessed by valuers or valuation models The energy performance
of the property is assessed by technical experts who perform energy audits and deliver Energy
Performance Certificates (EPC) The energy performance assessment of the building can also be
inferred by hedonistic modelling (ie Automated Valuation Models) to obtain ldquotheoreticalrdquo EPC (see
the Dutch and Belgian cases cited later in this report) In most cases the energy efficient mortgage will
be granted for the purchase and subsequent energy efficient renovation of existing properties The
energy performance resulting from specific renovation works will be assessed andor certified through
building renovation roadmaps and involve the expertise of constructionbuilding actors
Portfolio level (EEM certification and labelling for funding purposes) Energy efficient mortgages
pooled in a portfolio can constitute a new kind of asset class that classifies EEM portfolios as a ldquo2deg
alignedrdquo (aligned with the COP21 Paris Agreement pledges to limit climate heat change to less than 2
degrees Celsius) or ldquogreenrdquo bond eligible To align with current market practices and upcoming
regulations and requirements covered bond and securitisation issuers will need to disclose specific
information relative to the alignment of the portfolio to sustainable goals and the ldquogreenrdquo taxonomy
in place (see more on this in Section 2 of the report) They are subject to second party opinions and
external ratings from specialised agencies and certification bodies Therefore there is a need for in-
depth and robust data on energy performance in order to ensure that European low carbon energy
1 In France or in Ireland for example specialised agencies (ANAH and SEAI) are providing funds and grants to fuel-poor households to refurbish their homes
D32 Technical Report on Market Needs and Gaps
849
transition targets set at national and international levels relative to energy consumption and the
carbon footprint of the residential sector are met
Table 1 Reporting ldquoLayersrdquo and information sources
Reporting ldquoLayerrdquo Datainformation source Aggregation Level
Financial reporting Mortgage Lending InstitutionData repositories
Loan level
Valuation reporting ValuerReal estate data providersLender PropertyIndividualloan level
Energy performance reporting
Energy AuditorsArchitectsBuilding performance logbookGreen building label certifiers
PropertyIndividual level
Impact reporting Funding instrument issuerSecond party opinionldquoGreen bondrdquo certification agencies
Portfolio aggregated and macro level
Source EeDaPP Consortium
212 Existing reporting frameworks
For time cost and resource optimisation purposes the EeDaPP initiative must build on all existing
reporting templates and framework to gather the relevant data on Energy Efficient Mortgages
To date there are several reporting methods andor databases in place regarding the information that
the EeDaPP data portal needs to collate such as on the financial performance of loans property
valuation data the energy performance of the building stock energy efficiency upgrades and relevant
public policies regarding energy efficiency and performance in European countries
Financial performance reporting
Regarding financial reporting there are already several mandatory and regulatory reporting
frameworks that mortgage lending institutions must comply with and use to deliver data to their
regulator for transparency and prudential risk monitoring exercises These frameworks are either
public or confidential and comprise mandatory or optional reporting variables They constitute the
foundation of the EeDaPP reporting protocol and requirements regarding mortgage related and loan
level financial data
D32 Technical Report on Market Needs and Gaps
949
Table 2 Existing Data Templates
By fulfilling their reporting duties for their financial review either at loan level or at portfolio level
lending institutions can rely on data providers and repositories
Data repositories are directly involved in the development of a standardised data platform for Energy
Efficient Mortgages because of their extensive experience in defining reporting criteria and formats
and due to their implicit existing and often long-standing relationships with data owners (or data
providers which provide the data on behalf of the owner) in other words banks This means they are
uniquely positioned to explain the benefits to their data owners of the provision of this data and to
actively encourage data owners to provide this data Data repositories are furthermore crucial in
promoting the availability of additional robust and reliable energy efficiency data related to
residential and commercial mortgage loans and related debt instruments to their extensive network
of users eg lenders issuers investors rating agencies and central banks etc2
Credit reference agencies or Credit bureaux in some countries are companies which store
consumersrsquo utilities payment data with the purpose of credit scoring and other services (for example
fraud prevention) According to an ACCIS survey conducted in 2018 countries where energy utilities
supply payment data are Austria the Czech Republic Denmark Germany Iceland Poland Romania
Spain Switzerland and the United Kingdom Many banks are already in a business relationship with
2 Members of the EeDaPP Consortium European DataWarehouse Hypoport TXS CRIF
Current existing data-templates
Description Link
STS Residential Draft Template
Regulation shall apply to securitisations entered into on or after 1 January 2019
httpswwwesmaeuropaeupolicy-activitiessecuritisation
European Central Bank (EDW) Templates
The loan-level reporting requirements started on 3 January 2013 for RMBS and on 1 March 2013 for CMBS
httpswwwecbeuropaeupaymcollloanleveltransmissionhtmlindexenhtml
Rating Agency Templates
Quite similar and recently in most cases very similar to ECB loan level template (see above)
Not public
HTT NTT Harmonised investor report (HTT) and national investor report (for Dutch issuers available on issuer-website)
httpswwwcoveredbondlabelcomissuersharmonised-transparency-template
DSA Dutch national standard for investor reports used for securitised transactions
httpswwwdutchsecuritisationnlinvestor-reporting
AnaCredit Regulation
Dataset containing detailed information on individual bank loans in the euro area
httpswwwecbeuropaeustatsmoney_credit_bankinganacredithtmlindexenhtml
Source EeDaPP Consortium
D32 Technical Report on Market Needs and Gaps
1049
credit reference agencies and therefore they could represent an option to access the payment data
and subsequently use payments as a proxy to calculate savings
Reporting of the property prices and valuations
Databases at property level on real estate prices and characteristics exist at national level but are
gathered and stored by different actors in different EU countries Access is made publicly available for
research and commercial purposes in some countries but not all (free access in the UK and
Netherlands for a fee in France etc)
Examples of (semi-) public registers
- Notary transaction databases (France Belgium)
- Real-estate data providers (the Netherlands)
- Public institutions (eg the Royal Mail in the United Kingdom)
Real-estate data providers are independent technology companies specialising in the statistical
analysis and valuation of real estate Such companies can perform Automated Valuation Models
(AVM) for valuation of individual homes Their services can be used by rating agencies mortgage
lenders investors intermediaries validation institutes housing corporations consumer
organisations real estate companies brokers government agencies and regulators The European
AVM Alliance (EAA) was launched as a pan-European initiative at the end of 2012 with its mission
being to promote and standardise the usage of AVMs resulting in a consistent approach to automated
valuations in Europe EAA members include Calcasa (the Netherlands) Hometrack (the United
Kingdom) Eiendomsverdi (Norway) Vaumlrderingsdata (Sweden) CRIF (Italy) Tinsa (Spain) On-Geo
(Germany and Austria)
Reporting and data tools on the energy performance of the building stock
EU Building Stock Observatory The European Commission and the Building Performance Institute
Europe (BPIE) launched its Building Stock Observatory3 in November 2016 This constitutes an existing
platform to monitor and assess the energy performance of the existing building stock across Europe
To do so it assesses improvements in the energy efficiency of buildings and the impact of these on the
actual energy consumption of the building sector overall The Observatory contains a database a data
mapper and provides factsheets tracking
- Energy efficiency levels in buildings in individual EU countries and across the EU as a whole
- Different certification schemes (EPCs and nearly Zero Energy Efficient Buildings - nZEBs4) and
how they are implemented in terms of the financing available for renovating buildings
3 httpseceuropaeuenergyeneubuildings 4 Nearly zero-energy buildings (nZEBs) have very high energy performance The low amount of energy that these buildings require comes mostly from renewable sources
D32 Technical Report on Market Needs and Gaps
1149
Energy poverty5 levels across the EU
Over recent years the BPIE contributed to the development of several tools within the framework of
EU-funded projects and more Among these the European project ZEBRA2020 was developed to
monitor the market uptake of nZEBs across Europe and covers seventeen European countries and
almost 90 of the European building stock (EU amp EEA) These countries have different climatic
conditions polices and economic capabilities The ZEBRA2020 data tool offers a user-friendly
presentation of indicators related to the overall building stock and to nZEB activities The first part of
the tool presents an overview of the current building stock including renovation and construction
and monitors Energy Performance Certificate (EPC) activities by country (focusing on the projectrsquos
target countries) The tool endeavours to overcome data gaps and provide comprehensive datasets
which support stakeholders in their efforts to consolidate the transition to an nZEB market The
second part of the tool determines relevant indicators of nZEB buildings constructed after 2010 in
selected European countries Furthermore it aims to provide information on best cases in Europe
thereby showing most recurring technologies materials and strategies towards the nZEB target The
tool distinguishes between residential and non-residential nZEB buildings and determines some of
the most significant indicators regarding energy performance passive and active solutions and
production of renewable energy
Reporting on energy efficiency upgrades
The De-risking Energy Efficiency Platform (DEEP)6 is an open source database for the monitoring and
benchmarking of energy efficiency investments that provides detailed analysis and evidence on the
performance of energy efficiency investments in both commercial and residential sectors to support
the assessment of the related benefits and financial risks The DEEP platform offers the following
services
- Key Figures Provides a quick overview of the buildings and industry projects in the DEEP
- Data Overview Provides a more comprehensive (but still aggregated) overview of the
energy efficiency projects in the DEEP
- Chart Views Allows the user to view and filter a number of predefined charts for buildings
and industry energy efficiency projects
- Add and Manage Projects Data providers can upload and manage data on their energy
efficiency projects
- Analysis Toolbox Allows users to create charts in a dynamic and highly customisable
manner
5 Energy poverty is a multi-dimensional concept based on several prices income housing and living condition indicators More information can be found here 6 httpsdeepeefigeu
D32 Technical Report on Market Needs and Gaps
1249
- Benchmark Projects Allows users to benchmark their own projects and portfolios of
projects against a selected group of reference projects from the DEEP database
The EEFIG DEEP platform reports key financial and energy indicators from over 5000 energy efficiency
projects in buildings including almost 2000 residential multi-family buildings financed and developed
between 2012 and 2016 The data on energy efficiency projects included in the DEEP has been
provided by public and private investment funds and financial institutions national and regional
authorities as well as energy efficiency solution providers Data is stored and managed at the
European Commission level within DG Energy
Building Typology and Energy Consumption data portal TABULA7 as part of the EU-funded research
projects (2009-2012) TABULA residential building typologies have been developed for 13 European
countries Each national typology consists of a classification scheme grouping buildings according to
their size age and further parameters and a set of exemplary buildings representing the building
types These have been published by the project partners in national Building Typology Brochures
written in their respective languages As a common element all brochures contain double page
ldquoBuilding Display Sheetsrdquo for all example buildings on which energy related features and the effects
of refurbishment measures are illustrated graphically With a view to exchanging information at
European level the TABULA WebTool provides an online calculation of the exemplary buildings from
all countries displaying their energy related features and the possible energy savings that could be
realised by implementing refurbishment measures The basis of the TABULA WebTool is a simple and
transparent reference procedure for calculating the energy need the energy use by energyware and
the energyware assessment (primary energy carbon dioxide costs) The tool also provides an
estimate of the energy savings per msup2 per year if the selected dwelling undergoes energy upgrades
(classified in three categories existing state usual refurbishment and advanced refurbishment)
Individual Building Renovation Roadmap (iBROAD) Building data passport (Logbook)8 The iBRoad
project works on developing an Individual Building Renovation Roadmap for single-family houses This
tool provides a customised renovation plan over a long-term period (10-20 years) The renovation
roadmap is combined with a building logbook a repository where all the buildingrsquos related information
can be stored and continuously updated The type of information stored in the logbook and its
functions can evolve over time and could range from energy production and consumption to
equipment maintenance as well as insurance property plans and obligations energy bills smart
meter data and links to available financing options for renovation projects (eg green loans
incentives tax credits) The logbook will collect and structure information in five modules (General
and administrative information Building construction information Building Energy Performance
Building Operation and Use and SMART information collected through information and
communication technologies (ICT) such as IoT - Internet of Things appliances)
7 httpwebtoolbuilding-typologyeupdfur 8 httpsibroad-projecteunewsthe-logbook-data-quest
D32 Technical Report on Market Needs and Gaps
1349
Within that project several regional initiatives were developed and should enter into operation soon
such as PORTAL CASA + in Portugal and the Woning Pass in the Flanders region (Belgium)9
Netherlands EPC open database On the website httpwwwenergielabelatlasnl all the EPCrsquos in
the Netherlands are publicly available This openly accessible register displays full coverage in energy
performance labels at building unit level based on either a theoretical EPC or effectively delivered
certificate The database also displays a breakdown of the labelled energy performance for each
designated area (at district levels) as well as the average EPC rank
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot
Source Energielabelatlas
Reporting on energy efficiency policies
IEA Building Energy Efficiency Database (BEEP) - discontinued The International Energy Agency
provides a database of all registered public policies regarding energy efficiency
httpswwwieaorgbeep It provides an overview analysis of each country and a detailed list of
existing building codes labels and incentives in place The last update of this database was is 2010
Odysee-MURE Policy database MURE (Mesures dUtilisation Rationnelle de lEnergie) provides
information on energy efficiency policies and measures that have been carried out in the Member
States of the European Union The information is accessible by query in the database10
9 Prototype Online Tool available here here and here 10 httpwwwmeasures-odyssee-mureeutopics-energy-efficiency-policyasp
D32 Technical Report on Market Needs and Gaps
1449
22 Processing
Market needs The EeDaPP initiative aims to provide relevant robust and reliable information to
assess EEM performance and risk evaluation The common database is an unprecedented collection
of reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
221 Market needs Establish a direct link between loan level credit and mortgage
risks property valuation and energy performance
The underlying business case of a future EEM product is that there is an impact of the energy
performance of a residential or a commercial building on the level of risk associated with the mortgage
financing the property and its energy efficiency Energy Efficient Mortgages are less risky to finance
and therefore less costly in capital at balance sheet level for the bank because both the property value
and the borrower risk profile are better compared to another loan all other things equal One of the
objectives of the EeDaPP initiative is to provide statistical evidence supporting this business case and
establishing a direct link between loan level credit and mortgage risks property valuation and energy
performance
The EeDaPP consortium partners are currently researching the correlation between energy efficiency
in buildings and the probability of default (PD) associated with the mortgage The research team is
currently investigating the Dutch residential market using European Data Warehouse loan data and
Dutch Energy Agency (RVO) data on energy performance using EPCs and their findings are to be
published in a later stage
222 Existing studies on the link between energy performance of buildings and
mortgage default
To date there exist very few research studies that investigate the relationship between energy
efficiency and default rates and those which do mainly focus on the United Statesrsquo (US) market The
main reason for this is that there is a significant lack of data available in Europe on both financial and
energy efficiency at loan level with a direct matching link (ie datasets that contain both energy and
financial loan level data)
Focussing on the European market a preliminary study11 published by Bank of England uses loan
performance data for residential mortgages in the entire UK (year-end 2017) matched with the energy
performance certificates (EPCs12) of the underlying properties and with information on the income of
the borrower at the time of mortgage origination EPCs in the UK rate properties from A (most
11 Available here 12 Data obtained here httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
D32 Technical Report on Market Needs and Gaps
1549
efficient) to G (least efficient) and provide information on the annual energy costs of a property
Properties are categorised into three buckets lsquoHigh energy efficiencyrsquo (EPC ratings of A B or C)
lsquoMedium energy efficiencyrsquo (EPC rating of D) and lsquoLow energy efficiencyrsquo (EPC ratings of E F or G) For
example the annual energy bill of a highly energy-efficient four-bedroomed house is on average GBP
1080 lower than for a four-bedroomed house with low energy efficiency
Table 3 Annual energy costs (in GBP) by type and energy efficiency of the property
Type of property High energy efficiency
Medium energy
efficiency
Low energy
efficiency
(EPC rating A-C) (EPC rating D) (EPC rating E-G)
2-bedroomed flat pound417 pound676 pound1023
3-bedroomed house pound578 pound891 pound1340
4-bedroomed house pound695 pound1130 pound1775
Source Bank Underground
By using univariate comparisons the study shows that about 093 of residential mortgages against
energy-efficient properties are in payment arrears This share is 021 percentage points lower than
the share of mortgages against energy-inefficient properties which is 114 This difference is
statistically significant at the one percent level In Figure 3 the black dot illustrates this difference
The black bar shows the 99 confidence interval
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency)
Source Bank Underground
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
649
2 IDENTIFYING MARKET NEEDS
21 Gathering
Market needs to design a harmonised common data portal which market players generally and
lending institutions in particular need to gather and consolidate information coming from different
sources of different natures and with several levels of aggregation Moreover the implementation of
the data gathering and reporting protocol must be elaborated with the objective of optimisation and
cost mutualisation for the EEM product and its integration with IT systems already in place (ie
integrate with existing reporting requirements and practices minimise additional criteria)
211 Market needs Energy Efficient Mortgages framework and stakeholders
The EeDaPP initiative aims to develop reporting standards and design a common data portal for EEM
This implies gathering relevant information from several stakeholders The Energy Efficient Mortgage
market is complex as it involves numerous and diverse actors from both the public and the private
spheres on the retail and capital markets sides (see Figure 1)
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side
Source EeDaPP Consortium
The Energy Efficient Mortgage data reporting protocol is an integrated tool that gathers key data
and indicators from three different ldquolayersrdquo according to the sourcing and the use of the data
provided
EEM
Borrowers
Banks
Valuers
Public Authorities
SMEs
Technical Experts
EEM Portfolio
Investors
Capital Markets
Authorities
Certification Bodies
Rating Agengies
Internation-al pledges
on Paris Agreement
Green Bond
Issuers
D32 Technical Report on Market Needs and Gaps
749
Loan level (banks and borrowers) On the origination side borrowers are at the very beginning of the
value chain as they trigger the energy efficiency investment (either by buying a dwelling that is already
energy efficient or by undertaking energy upgrades on their property) These initial investors can be
real-estate companies (private or social housing funders) or households (that can be either private
landlords landlords in co-ownership or tenants) that become borrowers once they decide to finance
their project with bank lending and apply for financing via a loan or a mortgage from lending
institutions These lending institutions can be of several types private banks specialised banks or
public entities that operate with financial intermediaries Note that in some cases specific groups of
households can rely on specialised agencies1 such as credit assessors as a first point of contact Most
secured lending requires the gathering of information on both the status of the borrower herhis
creditworthiness determined by the lender and the quality of the underlying collateral The former is
derived directly from the borrower the latter is advised by a valuer or via an AVM (automated
valuation model) instructed by the lending institution The role of the valuer who is typically a
qualified professional operating in line with requirements laid down by their professional body is
normally to supply an estimate of the appraisal value of the asset as at the appraisal date of valuation
(Market Value - MV or Mortgage Lending Value - MLV) This value will determine the (current) Loan
to Value ratio which is determinant for the bank to assess the amount of the requested loan relative
to the value of the property
Asset level (energy performance of the building and energy efficiency upgrades) The value of the
property and selected features are assessed by valuers or valuation models The energy performance
of the property is assessed by technical experts who perform energy audits and deliver Energy
Performance Certificates (EPC) The energy performance assessment of the building can also be
inferred by hedonistic modelling (ie Automated Valuation Models) to obtain ldquotheoreticalrdquo EPC (see
the Dutch and Belgian cases cited later in this report) In most cases the energy efficient mortgage will
be granted for the purchase and subsequent energy efficient renovation of existing properties The
energy performance resulting from specific renovation works will be assessed andor certified through
building renovation roadmaps and involve the expertise of constructionbuilding actors
Portfolio level (EEM certification and labelling for funding purposes) Energy efficient mortgages
pooled in a portfolio can constitute a new kind of asset class that classifies EEM portfolios as a ldquo2deg
alignedrdquo (aligned with the COP21 Paris Agreement pledges to limit climate heat change to less than 2
degrees Celsius) or ldquogreenrdquo bond eligible To align with current market practices and upcoming
regulations and requirements covered bond and securitisation issuers will need to disclose specific
information relative to the alignment of the portfolio to sustainable goals and the ldquogreenrdquo taxonomy
in place (see more on this in Section 2 of the report) They are subject to second party opinions and
external ratings from specialised agencies and certification bodies Therefore there is a need for in-
depth and robust data on energy performance in order to ensure that European low carbon energy
1 In France or in Ireland for example specialised agencies (ANAH and SEAI) are providing funds and grants to fuel-poor households to refurbish their homes
D32 Technical Report on Market Needs and Gaps
849
transition targets set at national and international levels relative to energy consumption and the
carbon footprint of the residential sector are met
Table 1 Reporting ldquoLayersrdquo and information sources
Reporting ldquoLayerrdquo Datainformation source Aggregation Level
Financial reporting Mortgage Lending InstitutionData repositories
Loan level
Valuation reporting ValuerReal estate data providersLender PropertyIndividualloan level
Energy performance reporting
Energy AuditorsArchitectsBuilding performance logbookGreen building label certifiers
PropertyIndividual level
Impact reporting Funding instrument issuerSecond party opinionldquoGreen bondrdquo certification agencies
Portfolio aggregated and macro level
Source EeDaPP Consortium
212 Existing reporting frameworks
For time cost and resource optimisation purposes the EeDaPP initiative must build on all existing
reporting templates and framework to gather the relevant data on Energy Efficient Mortgages
To date there are several reporting methods andor databases in place regarding the information that
the EeDaPP data portal needs to collate such as on the financial performance of loans property
valuation data the energy performance of the building stock energy efficiency upgrades and relevant
public policies regarding energy efficiency and performance in European countries
Financial performance reporting
Regarding financial reporting there are already several mandatory and regulatory reporting
frameworks that mortgage lending institutions must comply with and use to deliver data to their
regulator for transparency and prudential risk monitoring exercises These frameworks are either
public or confidential and comprise mandatory or optional reporting variables They constitute the
foundation of the EeDaPP reporting protocol and requirements regarding mortgage related and loan
level financial data
D32 Technical Report on Market Needs and Gaps
949
Table 2 Existing Data Templates
By fulfilling their reporting duties for their financial review either at loan level or at portfolio level
lending institutions can rely on data providers and repositories
Data repositories are directly involved in the development of a standardised data platform for Energy
Efficient Mortgages because of their extensive experience in defining reporting criteria and formats
and due to their implicit existing and often long-standing relationships with data owners (or data
providers which provide the data on behalf of the owner) in other words banks This means they are
uniquely positioned to explain the benefits to their data owners of the provision of this data and to
actively encourage data owners to provide this data Data repositories are furthermore crucial in
promoting the availability of additional robust and reliable energy efficiency data related to
residential and commercial mortgage loans and related debt instruments to their extensive network
of users eg lenders issuers investors rating agencies and central banks etc2
Credit reference agencies or Credit bureaux in some countries are companies which store
consumersrsquo utilities payment data with the purpose of credit scoring and other services (for example
fraud prevention) According to an ACCIS survey conducted in 2018 countries where energy utilities
supply payment data are Austria the Czech Republic Denmark Germany Iceland Poland Romania
Spain Switzerland and the United Kingdom Many banks are already in a business relationship with
2 Members of the EeDaPP Consortium European DataWarehouse Hypoport TXS CRIF
Current existing data-templates
Description Link
STS Residential Draft Template
Regulation shall apply to securitisations entered into on or after 1 January 2019
httpswwwesmaeuropaeupolicy-activitiessecuritisation
European Central Bank (EDW) Templates
The loan-level reporting requirements started on 3 January 2013 for RMBS and on 1 March 2013 for CMBS
httpswwwecbeuropaeupaymcollloanleveltransmissionhtmlindexenhtml
Rating Agency Templates
Quite similar and recently in most cases very similar to ECB loan level template (see above)
Not public
HTT NTT Harmonised investor report (HTT) and national investor report (for Dutch issuers available on issuer-website)
httpswwwcoveredbondlabelcomissuersharmonised-transparency-template
DSA Dutch national standard for investor reports used for securitised transactions
httpswwwdutchsecuritisationnlinvestor-reporting
AnaCredit Regulation
Dataset containing detailed information on individual bank loans in the euro area
httpswwwecbeuropaeustatsmoney_credit_bankinganacredithtmlindexenhtml
Source EeDaPP Consortium
D32 Technical Report on Market Needs and Gaps
1049
credit reference agencies and therefore they could represent an option to access the payment data
and subsequently use payments as a proxy to calculate savings
Reporting of the property prices and valuations
Databases at property level on real estate prices and characteristics exist at national level but are
gathered and stored by different actors in different EU countries Access is made publicly available for
research and commercial purposes in some countries but not all (free access in the UK and
Netherlands for a fee in France etc)
Examples of (semi-) public registers
- Notary transaction databases (France Belgium)
- Real-estate data providers (the Netherlands)
- Public institutions (eg the Royal Mail in the United Kingdom)
Real-estate data providers are independent technology companies specialising in the statistical
analysis and valuation of real estate Such companies can perform Automated Valuation Models
(AVM) for valuation of individual homes Their services can be used by rating agencies mortgage
lenders investors intermediaries validation institutes housing corporations consumer
organisations real estate companies brokers government agencies and regulators The European
AVM Alliance (EAA) was launched as a pan-European initiative at the end of 2012 with its mission
being to promote and standardise the usage of AVMs resulting in a consistent approach to automated
valuations in Europe EAA members include Calcasa (the Netherlands) Hometrack (the United
Kingdom) Eiendomsverdi (Norway) Vaumlrderingsdata (Sweden) CRIF (Italy) Tinsa (Spain) On-Geo
(Germany and Austria)
Reporting and data tools on the energy performance of the building stock
EU Building Stock Observatory The European Commission and the Building Performance Institute
Europe (BPIE) launched its Building Stock Observatory3 in November 2016 This constitutes an existing
platform to monitor and assess the energy performance of the existing building stock across Europe
To do so it assesses improvements in the energy efficiency of buildings and the impact of these on the
actual energy consumption of the building sector overall The Observatory contains a database a data
mapper and provides factsheets tracking
- Energy efficiency levels in buildings in individual EU countries and across the EU as a whole
- Different certification schemes (EPCs and nearly Zero Energy Efficient Buildings - nZEBs4) and
how they are implemented in terms of the financing available for renovating buildings
3 httpseceuropaeuenergyeneubuildings 4 Nearly zero-energy buildings (nZEBs) have very high energy performance The low amount of energy that these buildings require comes mostly from renewable sources
D32 Technical Report on Market Needs and Gaps
1149
Energy poverty5 levels across the EU
Over recent years the BPIE contributed to the development of several tools within the framework of
EU-funded projects and more Among these the European project ZEBRA2020 was developed to
monitor the market uptake of nZEBs across Europe and covers seventeen European countries and
almost 90 of the European building stock (EU amp EEA) These countries have different climatic
conditions polices and economic capabilities The ZEBRA2020 data tool offers a user-friendly
presentation of indicators related to the overall building stock and to nZEB activities The first part of
the tool presents an overview of the current building stock including renovation and construction
and monitors Energy Performance Certificate (EPC) activities by country (focusing on the projectrsquos
target countries) The tool endeavours to overcome data gaps and provide comprehensive datasets
which support stakeholders in their efforts to consolidate the transition to an nZEB market The
second part of the tool determines relevant indicators of nZEB buildings constructed after 2010 in
selected European countries Furthermore it aims to provide information on best cases in Europe
thereby showing most recurring technologies materials and strategies towards the nZEB target The
tool distinguishes between residential and non-residential nZEB buildings and determines some of
the most significant indicators regarding energy performance passive and active solutions and
production of renewable energy
Reporting on energy efficiency upgrades
The De-risking Energy Efficiency Platform (DEEP)6 is an open source database for the monitoring and
benchmarking of energy efficiency investments that provides detailed analysis and evidence on the
performance of energy efficiency investments in both commercial and residential sectors to support
the assessment of the related benefits and financial risks The DEEP platform offers the following
services
- Key Figures Provides a quick overview of the buildings and industry projects in the DEEP
- Data Overview Provides a more comprehensive (but still aggregated) overview of the
energy efficiency projects in the DEEP
- Chart Views Allows the user to view and filter a number of predefined charts for buildings
and industry energy efficiency projects
- Add and Manage Projects Data providers can upload and manage data on their energy
efficiency projects
- Analysis Toolbox Allows users to create charts in a dynamic and highly customisable
manner
5 Energy poverty is a multi-dimensional concept based on several prices income housing and living condition indicators More information can be found here 6 httpsdeepeefigeu
D32 Technical Report on Market Needs and Gaps
1249
- Benchmark Projects Allows users to benchmark their own projects and portfolios of
projects against a selected group of reference projects from the DEEP database
The EEFIG DEEP platform reports key financial and energy indicators from over 5000 energy efficiency
projects in buildings including almost 2000 residential multi-family buildings financed and developed
between 2012 and 2016 The data on energy efficiency projects included in the DEEP has been
provided by public and private investment funds and financial institutions national and regional
authorities as well as energy efficiency solution providers Data is stored and managed at the
European Commission level within DG Energy
Building Typology and Energy Consumption data portal TABULA7 as part of the EU-funded research
projects (2009-2012) TABULA residential building typologies have been developed for 13 European
countries Each national typology consists of a classification scheme grouping buildings according to
their size age and further parameters and a set of exemplary buildings representing the building
types These have been published by the project partners in national Building Typology Brochures
written in their respective languages As a common element all brochures contain double page
ldquoBuilding Display Sheetsrdquo for all example buildings on which energy related features and the effects
of refurbishment measures are illustrated graphically With a view to exchanging information at
European level the TABULA WebTool provides an online calculation of the exemplary buildings from
all countries displaying their energy related features and the possible energy savings that could be
realised by implementing refurbishment measures The basis of the TABULA WebTool is a simple and
transparent reference procedure for calculating the energy need the energy use by energyware and
the energyware assessment (primary energy carbon dioxide costs) The tool also provides an
estimate of the energy savings per msup2 per year if the selected dwelling undergoes energy upgrades
(classified in three categories existing state usual refurbishment and advanced refurbishment)
Individual Building Renovation Roadmap (iBROAD) Building data passport (Logbook)8 The iBRoad
project works on developing an Individual Building Renovation Roadmap for single-family houses This
tool provides a customised renovation plan over a long-term period (10-20 years) The renovation
roadmap is combined with a building logbook a repository where all the buildingrsquos related information
can be stored and continuously updated The type of information stored in the logbook and its
functions can evolve over time and could range from energy production and consumption to
equipment maintenance as well as insurance property plans and obligations energy bills smart
meter data and links to available financing options for renovation projects (eg green loans
incentives tax credits) The logbook will collect and structure information in five modules (General
and administrative information Building construction information Building Energy Performance
Building Operation and Use and SMART information collected through information and
communication technologies (ICT) such as IoT - Internet of Things appliances)
7 httpwebtoolbuilding-typologyeupdfur 8 httpsibroad-projecteunewsthe-logbook-data-quest
D32 Technical Report on Market Needs and Gaps
1349
Within that project several regional initiatives were developed and should enter into operation soon
such as PORTAL CASA + in Portugal and the Woning Pass in the Flanders region (Belgium)9
Netherlands EPC open database On the website httpwwwenergielabelatlasnl all the EPCrsquos in
the Netherlands are publicly available This openly accessible register displays full coverage in energy
performance labels at building unit level based on either a theoretical EPC or effectively delivered
certificate The database also displays a breakdown of the labelled energy performance for each
designated area (at district levels) as well as the average EPC rank
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot
Source Energielabelatlas
Reporting on energy efficiency policies
IEA Building Energy Efficiency Database (BEEP) - discontinued The International Energy Agency
provides a database of all registered public policies regarding energy efficiency
httpswwwieaorgbeep It provides an overview analysis of each country and a detailed list of
existing building codes labels and incentives in place The last update of this database was is 2010
Odysee-MURE Policy database MURE (Mesures dUtilisation Rationnelle de lEnergie) provides
information on energy efficiency policies and measures that have been carried out in the Member
States of the European Union The information is accessible by query in the database10
9 Prototype Online Tool available here here and here 10 httpwwwmeasures-odyssee-mureeutopics-energy-efficiency-policyasp
D32 Technical Report on Market Needs and Gaps
1449
22 Processing
Market needs The EeDaPP initiative aims to provide relevant robust and reliable information to
assess EEM performance and risk evaluation The common database is an unprecedented collection
of reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
221 Market needs Establish a direct link between loan level credit and mortgage
risks property valuation and energy performance
The underlying business case of a future EEM product is that there is an impact of the energy
performance of a residential or a commercial building on the level of risk associated with the mortgage
financing the property and its energy efficiency Energy Efficient Mortgages are less risky to finance
and therefore less costly in capital at balance sheet level for the bank because both the property value
and the borrower risk profile are better compared to another loan all other things equal One of the
objectives of the EeDaPP initiative is to provide statistical evidence supporting this business case and
establishing a direct link between loan level credit and mortgage risks property valuation and energy
performance
The EeDaPP consortium partners are currently researching the correlation between energy efficiency
in buildings and the probability of default (PD) associated with the mortgage The research team is
currently investigating the Dutch residential market using European Data Warehouse loan data and
Dutch Energy Agency (RVO) data on energy performance using EPCs and their findings are to be
published in a later stage
222 Existing studies on the link between energy performance of buildings and
mortgage default
To date there exist very few research studies that investigate the relationship between energy
efficiency and default rates and those which do mainly focus on the United Statesrsquo (US) market The
main reason for this is that there is a significant lack of data available in Europe on both financial and
energy efficiency at loan level with a direct matching link (ie datasets that contain both energy and
financial loan level data)
Focussing on the European market a preliminary study11 published by Bank of England uses loan
performance data for residential mortgages in the entire UK (year-end 2017) matched with the energy
performance certificates (EPCs12) of the underlying properties and with information on the income of
the borrower at the time of mortgage origination EPCs in the UK rate properties from A (most
11 Available here 12 Data obtained here httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
D32 Technical Report on Market Needs and Gaps
1549
efficient) to G (least efficient) and provide information on the annual energy costs of a property
Properties are categorised into three buckets lsquoHigh energy efficiencyrsquo (EPC ratings of A B or C)
lsquoMedium energy efficiencyrsquo (EPC rating of D) and lsquoLow energy efficiencyrsquo (EPC ratings of E F or G) For
example the annual energy bill of a highly energy-efficient four-bedroomed house is on average GBP
1080 lower than for a four-bedroomed house with low energy efficiency
Table 3 Annual energy costs (in GBP) by type and energy efficiency of the property
Type of property High energy efficiency
Medium energy
efficiency
Low energy
efficiency
(EPC rating A-C) (EPC rating D) (EPC rating E-G)
2-bedroomed flat pound417 pound676 pound1023
3-bedroomed house pound578 pound891 pound1340
4-bedroomed house pound695 pound1130 pound1775
Source Bank Underground
By using univariate comparisons the study shows that about 093 of residential mortgages against
energy-efficient properties are in payment arrears This share is 021 percentage points lower than
the share of mortgages against energy-inefficient properties which is 114 This difference is
statistically significant at the one percent level In Figure 3 the black dot illustrates this difference
The black bar shows the 99 confidence interval
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency)
Source Bank Underground
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
749
Loan level (banks and borrowers) On the origination side borrowers are at the very beginning of the
value chain as they trigger the energy efficiency investment (either by buying a dwelling that is already
energy efficient or by undertaking energy upgrades on their property) These initial investors can be
real-estate companies (private or social housing funders) or households (that can be either private
landlords landlords in co-ownership or tenants) that become borrowers once they decide to finance
their project with bank lending and apply for financing via a loan or a mortgage from lending
institutions These lending institutions can be of several types private banks specialised banks or
public entities that operate with financial intermediaries Note that in some cases specific groups of
households can rely on specialised agencies1 such as credit assessors as a first point of contact Most
secured lending requires the gathering of information on both the status of the borrower herhis
creditworthiness determined by the lender and the quality of the underlying collateral The former is
derived directly from the borrower the latter is advised by a valuer or via an AVM (automated
valuation model) instructed by the lending institution The role of the valuer who is typically a
qualified professional operating in line with requirements laid down by their professional body is
normally to supply an estimate of the appraisal value of the asset as at the appraisal date of valuation
(Market Value - MV or Mortgage Lending Value - MLV) This value will determine the (current) Loan
to Value ratio which is determinant for the bank to assess the amount of the requested loan relative
to the value of the property
Asset level (energy performance of the building and energy efficiency upgrades) The value of the
property and selected features are assessed by valuers or valuation models The energy performance
of the property is assessed by technical experts who perform energy audits and deliver Energy
Performance Certificates (EPC) The energy performance assessment of the building can also be
inferred by hedonistic modelling (ie Automated Valuation Models) to obtain ldquotheoreticalrdquo EPC (see
the Dutch and Belgian cases cited later in this report) In most cases the energy efficient mortgage will
be granted for the purchase and subsequent energy efficient renovation of existing properties The
energy performance resulting from specific renovation works will be assessed andor certified through
building renovation roadmaps and involve the expertise of constructionbuilding actors
Portfolio level (EEM certification and labelling for funding purposes) Energy efficient mortgages
pooled in a portfolio can constitute a new kind of asset class that classifies EEM portfolios as a ldquo2deg
alignedrdquo (aligned with the COP21 Paris Agreement pledges to limit climate heat change to less than 2
degrees Celsius) or ldquogreenrdquo bond eligible To align with current market practices and upcoming
regulations and requirements covered bond and securitisation issuers will need to disclose specific
information relative to the alignment of the portfolio to sustainable goals and the ldquogreenrdquo taxonomy
in place (see more on this in Section 2 of the report) They are subject to second party opinions and
external ratings from specialised agencies and certification bodies Therefore there is a need for in-
depth and robust data on energy performance in order to ensure that European low carbon energy
1 In France or in Ireland for example specialised agencies (ANAH and SEAI) are providing funds and grants to fuel-poor households to refurbish their homes
D32 Technical Report on Market Needs and Gaps
849
transition targets set at national and international levels relative to energy consumption and the
carbon footprint of the residential sector are met
Table 1 Reporting ldquoLayersrdquo and information sources
Reporting ldquoLayerrdquo Datainformation source Aggregation Level
Financial reporting Mortgage Lending InstitutionData repositories
Loan level
Valuation reporting ValuerReal estate data providersLender PropertyIndividualloan level
Energy performance reporting
Energy AuditorsArchitectsBuilding performance logbookGreen building label certifiers
PropertyIndividual level
Impact reporting Funding instrument issuerSecond party opinionldquoGreen bondrdquo certification agencies
Portfolio aggregated and macro level
Source EeDaPP Consortium
212 Existing reporting frameworks
For time cost and resource optimisation purposes the EeDaPP initiative must build on all existing
reporting templates and framework to gather the relevant data on Energy Efficient Mortgages
To date there are several reporting methods andor databases in place regarding the information that
the EeDaPP data portal needs to collate such as on the financial performance of loans property
valuation data the energy performance of the building stock energy efficiency upgrades and relevant
public policies regarding energy efficiency and performance in European countries
Financial performance reporting
Regarding financial reporting there are already several mandatory and regulatory reporting
frameworks that mortgage lending institutions must comply with and use to deliver data to their
regulator for transparency and prudential risk monitoring exercises These frameworks are either
public or confidential and comprise mandatory or optional reporting variables They constitute the
foundation of the EeDaPP reporting protocol and requirements regarding mortgage related and loan
level financial data
D32 Technical Report on Market Needs and Gaps
949
Table 2 Existing Data Templates
By fulfilling their reporting duties for their financial review either at loan level or at portfolio level
lending institutions can rely on data providers and repositories
Data repositories are directly involved in the development of a standardised data platform for Energy
Efficient Mortgages because of their extensive experience in defining reporting criteria and formats
and due to their implicit existing and often long-standing relationships with data owners (or data
providers which provide the data on behalf of the owner) in other words banks This means they are
uniquely positioned to explain the benefits to their data owners of the provision of this data and to
actively encourage data owners to provide this data Data repositories are furthermore crucial in
promoting the availability of additional robust and reliable energy efficiency data related to
residential and commercial mortgage loans and related debt instruments to their extensive network
of users eg lenders issuers investors rating agencies and central banks etc2
Credit reference agencies or Credit bureaux in some countries are companies which store
consumersrsquo utilities payment data with the purpose of credit scoring and other services (for example
fraud prevention) According to an ACCIS survey conducted in 2018 countries where energy utilities
supply payment data are Austria the Czech Republic Denmark Germany Iceland Poland Romania
Spain Switzerland and the United Kingdom Many banks are already in a business relationship with
2 Members of the EeDaPP Consortium European DataWarehouse Hypoport TXS CRIF
Current existing data-templates
Description Link
STS Residential Draft Template
Regulation shall apply to securitisations entered into on or after 1 January 2019
httpswwwesmaeuropaeupolicy-activitiessecuritisation
European Central Bank (EDW) Templates
The loan-level reporting requirements started on 3 January 2013 for RMBS and on 1 March 2013 for CMBS
httpswwwecbeuropaeupaymcollloanleveltransmissionhtmlindexenhtml
Rating Agency Templates
Quite similar and recently in most cases very similar to ECB loan level template (see above)
Not public
HTT NTT Harmonised investor report (HTT) and national investor report (for Dutch issuers available on issuer-website)
httpswwwcoveredbondlabelcomissuersharmonised-transparency-template
DSA Dutch national standard for investor reports used for securitised transactions
httpswwwdutchsecuritisationnlinvestor-reporting
AnaCredit Regulation
Dataset containing detailed information on individual bank loans in the euro area
httpswwwecbeuropaeustatsmoney_credit_bankinganacredithtmlindexenhtml
Source EeDaPP Consortium
D32 Technical Report on Market Needs and Gaps
1049
credit reference agencies and therefore they could represent an option to access the payment data
and subsequently use payments as a proxy to calculate savings
Reporting of the property prices and valuations
Databases at property level on real estate prices and characteristics exist at national level but are
gathered and stored by different actors in different EU countries Access is made publicly available for
research and commercial purposes in some countries but not all (free access in the UK and
Netherlands for a fee in France etc)
Examples of (semi-) public registers
- Notary transaction databases (France Belgium)
- Real-estate data providers (the Netherlands)
- Public institutions (eg the Royal Mail in the United Kingdom)
Real-estate data providers are independent technology companies specialising in the statistical
analysis and valuation of real estate Such companies can perform Automated Valuation Models
(AVM) for valuation of individual homes Their services can be used by rating agencies mortgage
lenders investors intermediaries validation institutes housing corporations consumer
organisations real estate companies brokers government agencies and regulators The European
AVM Alliance (EAA) was launched as a pan-European initiative at the end of 2012 with its mission
being to promote and standardise the usage of AVMs resulting in a consistent approach to automated
valuations in Europe EAA members include Calcasa (the Netherlands) Hometrack (the United
Kingdom) Eiendomsverdi (Norway) Vaumlrderingsdata (Sweden) CRIF (Italy) Tinsa (Spain) On-Geo
(Germany and Austria)
Reporting and data tools on the energy performance of the building stock
EU Building Stock Observatory The European Commission and the Building Performance Institute
Europe (BPIE) launched its Building Stock Observatory3 in November 2016 This constitutes an existing
platform to monitor and assess the energy performance of the existing building stock across Europe
To do so it assesses improvements in the energy efficiency of buildings and the impact of these on the
actual energy consumption of the building sector overall The Observatory contains a database a data
mapper and provides factsheets tracking
- Energy efficiency levels in buildings in individual EU countries and across the EU as a whole
- Different certification schemes (EPCs and nearly Zero Energy Efficient Buildings - nZEBs4) and
how they are implemented in terms of the financing available for renovating buildings
3 httpseceuropaeuenergyeneubuildings 4 Nearly zero-energy buildings (nZEBs) have very high energy performance The low amount of energy that these buildings require comes mostly from renewable sources
D32 Technical Report on Market Needs and Gaps
1149
Energy poverty5 levels across the EU
Over recent years the BPIE contributed to the development of several tools within the framework of
EU-funded projects and more Among these the European project ZEBRA2020 was developed to
monitor the market uptake of nZEBs across Europe and covers seventeen European countries and
almost 90 of the European building stock (EU amp EEA) These countries have different climatic
conditions polices and economic capabilities The ZEBRA2020 data tool offers a user-friendly
presentation of indicators related to the overall building stock and to nZEB activities The first part of
the tool presents an overview of the current building stock including renovation and construction
and monitors Energy Performance Certificate (EPC) activities by country (focusing on the projectrsquos
target countries) The tool endeavours to overcome data gaps and provide comprehensive datasets
which support stakeholders in their efforts to consolidate the transition to an nZEB market The
second part of the tool determines relevant indicators of nZEB buildings constructed after 2010 in
selected European countries Furthermore it aims to provide information on best cases in Europe
thereby showing most recurring technologies materials and strategies towards the nZEB target The
tool distinguishes between residential and non-residential nZEB buildings and determines some of
the most significant indicators regarding energy performance passive and active solutions and
production of renewable energy
Reporting on energy efficiency upgrades
The De-risking Energy Efficiency Platform (DEEP)6 is an open source database for the monitoring and
benchmarking of energy efficiency investments that provides detailed analysis and evidence on the
performance of energy efficiency investments in both commercial and residential sectors to support
the assessment of the related benefits and financial risks The DEEP platform offers the following
services
- Key Figures Provides a quick overview of the buildings and industry projects in the DEEP
- Data Overview Provides a more comprehensive (but still aggregated) overview of the
energy efficiency projects in the DEEP
- Chart Views Allows the user to view and filter a number of predefined charts for buildings
and industry energy efficiency projects
- Add and Manage Projects Data providers can upload and manage data on their energy
efficiency projects
- Analysis Toolbox Allows users to create charts in a dynamic and highly customisable
manner
5 Energy poverty is a multi-dimensional concept based on several prices income housing and living condition indicators More information can be found here 6 httpsdeepeefigeu
D32 Technical Report on Market Needs and Gaps
1249
- Benchmark Projects Allows users to benchmark their own projects and portfolios of
projects against a selected group of reference projects from the DEEP database
The EEFIG DEEP platform reports key financial and energy indicators from over 5000 energy efficiency
projects in buildings including almost 2000 residential multi-family buildings financed and developed
between 2012 and 2016 The data on energy efficiency projects included in the DEEP has been
provided by public and private investment funds and financial institutions national and regional
authorities as well as energy efficiency solution providers Data is stored and managed at the
European Commission level within DG Energy
Building Typology and Energy Consumption data portal TABULA7 as part of the EU-funded research
projects (2009-2012) TABULA residential building typologies have been developed for 13 European
countries Each national typology consists of a classification scheme grouping buildings according to
their size age and further parameters and a set of exemplary buildings representing the building
types These have been published by the project partners in national Building Typology Brochures
written in their respective languages As a common element all brochures contain double page
ldquoBuilding Display Sheetsrdquo for all example buildings on which energy related features and the effects
of refurbishment measures are illustrated graphically With a view to exchanging information at
European level the TABULA WebTool provides an online calculation of the exemplary buildings from
all countries displaying their energy related features and the possible energy savings that could be
realised by implementing refurbishment measures The basis of the TABULA WebTool is a simple and
transparent reference procedure for calculating the energy need the energy use by energyware and
the energyware assessment (primary energy carbon dioxide costs) The tool also provides an
estimate of the energy savings per msup2 per year if the selected dwelling undergoes energy upgrades
(classified in three categories existing state usual refurbishment and advanced refurbishment)
Individual Building Renovation Roadmap (iBROAD) Building data passport (Logbook)8 The iBRoad
project works on developing an Individual Building Renovation Roadmap for single-family houses This
tool provides a customised renovation plan over a long-term period (10-20 years) The renovation
roadmap is combined with a building logbook a repository where all the buildingrsquos related information
can be stored and continuously updated The type of information stored in the logbook and its
functions can evolve over time and could range from energy production and consumption to
equipment maintenance as well as insurance property plans and obligations energy bills smart
meter data and links to available financing options for renovation projects (eg green loans
incentives tax credits) The logbook will collect and structure information in five modules (General
and administrative information Building construction information Building Energy Performance
Building Operation and Use and SMART information collected through information and
communication technologies (ICT) such as IoT - Internet of Things appliances)
7 httpwebtoolbuilding-typologyeupdfur 8 httpsibroad-projecteunewsthe-logbook-data-quest
D32 Technical Report on Market Needs and Gaps
1349
Within that project several regional initiatives were developed and should enter into operation soon
such as PORTAL CASA + in Portugal and the Woning Pass in the Flanders region (Belgium)9
Netherlands EPC open database On the website httpwwwenergielabelatlasnl all the EPCrsquos in
the Netherlands are publicly available This openly accessible register displays full coverage in energy
performance labels at building unit level based on either a theoretical EPC or effectively delivered
certificate The database also displays a breakdown of the labelled energy performance for each
designated area (at district levels) as well as the average EPC rank
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot
Source Energielabelatlas
Reporting on energy efficiency policies
IEA Building Energy Efficiency Database (BEEP) - discontinued The International Energy Agency
provides a database of all registered public policies regarding energy efficiency
httpswwwieaorgbeep It provides an overview analysis of each country and a detailed list of
existing building codes labels and incentives in place The last update of this database was is 2010
Odysee-MURE Policy database MURE (Mesures dUtilisation Rationnelle de lEnergie) provides
information on energy efficiency policies and measures that have been carried out in the Member
States of the European Union The information is accessible by query in the database10
9 Prototype Online Tool available here here and here 10 httpwwwmeasures-odyssee-mureeutopics-energy-efficiency-policyasp
D32 Technical Report on Market Needs and Gaps
1449
22 Processing
Market needs The EeDaPP initiative aims to provide relevant robust and reliable information to
assess EEM performance and risk evaluation The common database is an unprecedented collection
of reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
221 Market needs Establish a direct link between loan level credit and mortgage
risks property valuation and energy performance
The underlying business case of a future EEM product is that there is an impact of the energy
performance of a residential or a commercial building on the level of risk associated with the mortgage
financing the property and its energy efficiency Energy Efficient Mortgages are less risky to finance
and therefore less costly in capital at balance sheet level for the bank because both the property value
and the borrower risk profile are better compared to another loan all other things equal One of the
objectives of the EeDaPP initiative is to provide statistical evidence supporting this business case and
establishing a direct link between loan level credit and mortgage risks property valuation and energy
performance
The EeDaPP consortium partners are currently researching the correlation between energy efficiency
in buildings and the probability of default (PD) associated with the mortgage The research team is
currently investigating the Dutch residential market using European Data Warehouse loan data and
Dutch Energy Agency (RVO) data on energy performance using EPCs and their findings are to be
published in a later stage
222 Existing studies on the link between energy performance of buildings and
mortgage default
To date there exist very few research studies that investigate the relationship between energy
efficiency and default rates and those which do mainly focus on the United Statesrsquo (US) market The
main reason for this is that there is a significant lack of data available in Europe on both financial and
energy efficiency at loan level with a direct matching link (ie datasets that contain both energy and
financial loan level data)
Focussing on the European market a preliminary study11 published by Bank of England uses loan
performance data for residential mortgages in the entire UK (year-end 2017) matched with the energy
performance certificates (EPCs12) of the underlying properties and with information on the income of
the borrower at the time of mortgage origination EPCs in the UK rate properties from A (most
11 Available here 12 Data obtained here httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
D32 Technical Report on Market Needs and Gaps
1549
efficient) to G (least efficient) and provide information on the annual energy costs of a property
Properties are categorised into three buckets lsquoHigh energy efficiencyrsquo (EPC ratings of A B or C)
lsquoMedium energy efficiencyrsquo (EPC rating of D) and lsquoLow energy efficiencyrsquo (EPC ratings of E F or G) For
example the annual energy bill of a highly energy-efficient four-bedroomed house is on average GBP
1080 lower than for a four-bedroomed house with low energy efficiency
Table 3 Annual energy costs (in GBP) by type and energy efficiency of the property
Type of property High energy efficiency
Medium energy
efficiency
Low energy
efficiency
(EPC rating A-C) (EPC rating D) (EPC rating E-G)
2-bedroomed flat pound417 pound676 pound1023
3-bedroomed house pound578 pound891 pound1340
4-bedroomed house pound695 pound1130 pound1775
Source Bank Underground
By using univariate comparisons the study shows that about 093 of residential mortgages against
energy-efficient properties are in payment arrears This share is 021 percentage points lower than
the share of mortgages against energy-inefficient properties which is 114 This difference is
statistically significant at the one percent level In Figure 3 the black dot illustrates this difference
The black bar shows the 99 confidence interval
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency)
Source Bank Underground
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
849
transition targets set at national and international levels relative to energy consumption and the
carbon footprint of the residential sector are met
Table 1 Reporting ldquoLayersrdquo and information sources
Reporting ldquoLayerrdquo Datainformation source Aggregation Level
Financial reporting Mortgage Lending InstitutionData repositories
Loan level
Valuation reporting ValuerReal estate data providersLender PropertyIndividualloan level
Energy performance reporting
Energy AuditorsArchitectsBuilding performance logbookGreen building label certifiers
PropertyIndividual level
Impact reporting Funding instrument issuerSecond party opinionldquoGreen bondrdquo certification agencies
Portfolio aggregated and macro level
Source EeDaPP Consortium
212 Existing reporting frameworks
For time cost and resource optimisation purposes the EeDaPP initiative must build on all existing
reporting templates and framework to gather the relevant data on Energy Efficient Mortgages
To date there are several reporting methods andor databases in place regarding the information that
the EeDaPP data portal needs to collate such as on the financial performance of loans property
valuation data the energy performance of the building stock energy efficiency upgrades and relevant
public policies regarding energy efficiency and performance in European countries
Financial performance reporting
Regarding financial reporting there are already several mandatory and regulatory reporting
frameworks that mortgage lending institutions must comply with and use to deliver data to their
regulator for transparency and prudential risk monitoring exercises These frameworks are either
public or confidential and comprise mandatory or optional reporting variables They constitute the
foundation of the EeDaPP reporting protocol and requirements regarding mortgage related and loan
level financial data
D32 Technical Report on Market Needs and Gaps
949
Table 2 Existing Data Templates
By fulfilling their reporting duties for their financial review either at loan level or at portfolio level
lending institutions can rely on data providers and repositories
Data repositories are directly involved in the development of a standardised data platform for Energy
Efficient Mortgages because of their extensive experience in defining reporting criteria and formats
and due to their implicit existing and often long-standing relationships with data owners (or data
providers which provide the data on behalf of the owner) in other words banks This means they are
uniquely positioned to explain the benefits to their data owners of the provision of this data and to
actively encourage data owners to provide this data Data repositories are furthermore crucial in
promoting the availability of additional robust and reliable energy efficiency data related to
residential and commercial mortgage loans and related debt instruments to their extensive network
of users eg lenders issuers investors rating agencies and central banks etc2
Credit reference agencies or Credit bureaux in some countries are companies which store
consumersrsquo utilities payment data with the purpose of credit scoring and other services (for example
fraud prevention) According to an ACCIS survey conducted in 2018 countries where energy utilities
supply payment data are Austria the Czech Republic Denmark Germany Iceland Poland Romania
Spain Switzerland and the United Kingdom Many banks are already in a business relationship with
2 Members of the EeDaPP Consortium European DataWarehouse Hypoport TXS CRIF
Current existing data-templates
Description Link
STS Residential Draft Template
Regulation shall apply to securitisations entered into on or after 1 January 2019
httpswwwesmaeuropaeupolicy-activitiessecuritisation
European Central Bank (EDW) Templates
The loan-level reporting requirements started on 3 January 2013 for RMBS and on 1 March 2013 for CMBS
httpswwwecbeuropaeupaymcollloanleveltransmissionhtmlindexenhtml
Rating Agency Templates
Quite similar and recently in most cases very similar to ECB loan level template (see above)
Not public
HTT NTT Harmonised investor report (HTT) and national investor report (for Dutch issuers available on issuer-website)
httpswwwcoveredbondlabelcomissuersharmonised-transparency-template
DSA Dutch national standard for investor reports used for securitised transactions
httpswwwdutchsecuritisationnlinvestor-reporting
AnaCredit Regulation
Dataset containing detailed information on individual bank loans in the euro area
httpswwwecbeuropaeustatsmoney_credit_bankinganacredithtmlindexenhtml
Source EeDaPP Consortium
D32 Technical Report on Market Needs and Gaps
1049
credit reference agencies and therefore they could represent an option to access the payment data
and subsequently use payments as a proxy to calculate savings
Reporting of the property prices and valuations
Databases at property level on real estate prices and characteristics exist at national level but are
gathered and stored by different actors in different EU countries Access is made publicly available for
research and commercial purposes in some countries but not all (free access in the UK and
Netherlands for a fee in France etc)
Examples of (semi-) public registers
- Notary transaction databases (France Belgium)
- Real-estate data providers (the Netherlands)
- Public institutions (eg the Royal Mail in the United Kingdom)
Real-estate data providers are independent technology companies specialising in the statistical
analysis and valuation of real estate Such companies can perform Automated Valuation Models
(AVM) for valuation of individual homes Their services can be used by rating agencies mortgage
lenders investors intermediaries validation institutes housing corporations consumer
organisations real estate companies brokers government agencies and regulators The European
AVM Alliance (EAA) was launched as a pan-European initiative at the end of 2012 with its mission
being to promote and standardise the usage of AVMs resulting in a consistent approach to automated
valuations in Europe EAA members include Calcasa (the Netherlands) Hometrack (the United
Kingdom) Eiendomsverdi (Norway) Vaumlrderingsdata (Sweden) CRIF (Italy) Tinsa (Spain) On-Geo
(Germany and Austria)
Reporting and data tools on the energy performance of the building stock
EU Building Stock Observatory The European Commission and the Building Performance Institute
Europe (BPIE) launched its Building Stock Observatory3 in November 2016 This constitutes an existing
platform to monitor and assess the energy performance of the existing building stock across Europe
To do so it assesses improvements in the energy efficiency of buildings and the impact of these on the
actual energy consumption of the building sector overall The Observatory contains a database a data
mapper and provides factsheets tracking
- Energy efficiency levels in buildings in individual EU countries and across the EU as a whole
- Different certification schemes (EPCs and nearly Zero Energy Efficient Buildings - nZEBs4) and
how they are implemented in terms of the financing available for renovating buildings
3 httpseceuropaeuenergyeneubuildings 4 Nearly zero-energy buildings (nZEBs) have very high energy performance The low amount of energy that these buildings require comes mostly from renewable sources
D32 Technical Report on Market Needs and Gaps
1149
Energy poverty5 levels across the EU
Over recent years the BPIE contributed to the development of several tools within the framework of
EU-funded projects and more Among these the European project ZEBRA2020 was developed to
monitor the market uptake of nZEBs across Europe and covers seventeen European countries and
almost 90 of the European building stock (EU amp EEA) These countries have different climatic
conditions polices and economic capabilities The ZEBRA2020 data tool offers a user-friendly
presentation of indicators related to the overall building stock and to nZEB activities The first part of
the tool presents an overview of the current building stock including renovation and construction
and monitors Energy Performance Certificate (EPC) activities by country (focusing on the projectrsquos
target countries) The tool endeavours to overcome data gaps and provide comprehensive datasets
which support stakeholders in their efforts to consolidate the transition to an nZEB market The
second part of the tool determines relevant indicators of nZEB buildings constructed after 2010 in
selected European countries Furthermore it aims to provide information on best cases in Europe
thereby showing most recurring technologies materials and strategies towards the nZEB target The
tool distinguishes between residential and non-residential nZEB buildings and determines some of
the most significant indicators regarding energy performance passive and active solutions and
production of renewable energy
Reporting on energy efficiency upgrades
The De-risking Energy Efficiency Platform (DEEP)6 is an open source database for the monitoring and
benchmarking of energy efficiency investments that provides detailed analysis and evidence on the
performance of energy efficiency investments in both commercial and residential sectors to support
the assessment of the related benefits and financial risks The DEEP platform offers the following
services
- Key Figures Provides a quick overview of the buildings and industry projects in the DEEP
- Data Overview Provides a more comprehensive (but still aggregated) overview of the
energy efficiency projects in the DEEP
- Chart Views Allows the user to view and filter a number of predefined charts for buildings
and industry energy efficiency projects
- Add and Manage Projects Data providers can upload and manage data on their energy
efficiency projects
- Analysis Toolbox Allows users to create charts in a dynamic and highly customisable
manner
5 Energy poverty is a multi-dimensional concept based on several prices income housing and living condition indicators More information can be found here 6 httpsdeepeefigeu
D32 Technical Report on Market Needs and Gaps
1249
- Benchmark Projects Allows users to benchmark their own projects and portfolios of
projects against a selected group of reference projects from the DEEP database
The EEFIG DEEP platform reports key financial and energy indicators from over 5000 energy efficiency
projects in buildings including almost 2000 residential multi-family buildings financed and developed
between 2012 and 2016 The data on energy efficiency projects included in the DEEP has been
provided by public and private investment funds and financial institutions national and regional
authorities as well as energy efficiency solution providers Data is stored and managed at the
European Commission level within DG Energy
Building Typology and Energy Consumption data portal TABULA7 as part of the EU-funded research
projects (2009-2012) TABULA residential building typologies have been developed for 13 European
countries Each national typology consists of a classification scheme grouping buildings according to
their size age and further parameters and a set of exemplary buildings representing the building
types These have been published by the project partners in national Building Typology Brochures
written in their respective languages As a common element all brochures contain double page
ldquoBuilding Display Sheetsrdquo for all example buildings on which energy related features and the effects
of refurbishment measures are illustrated graphically With a view to exchanging information at
European level the TABULA WebTool provides an online calculation of the exemplary buildings from
all countries displaying their energy related features and the possible energy savings that could be
realised by implementing refurbishment measures The basis of the TABULA WebTool is a simple and
transparent reference procedure for calculating the energy need the energy use by energyware and
the energyware assessment (primary energy carbon dioxide costs) The tool also provides an
estimate of the energy savings per msup2 per year if the selected dwelling undergoes energy upgrades
(classified in three categories existing state usual refurbishment and advanced refurbishment)
Individual Building Renovation Roadmap (iBROAD) Building data passport (Logbook)8 The iBRoad
project works on developing an Individual Building Renovation Roadmap for single-family houses This
tool provides a customised renovation plan over a long-term period (10-20 years) The renovation
roadmap is combined with a building logbook a repository where all the buildingrsquos related information
can be stored and continuously updated The type of information stored in the logbook and its
functions can evolve over time and could range from energy production and consumption to
equipment maintenance as well as insurance property plans and obligations energy bills smart
meter data and links to available financing options for renovation projects (eg green loans
incentives tax credits) The logbook will collect and structure information in five modules (General
and administrative information Building construction information Building Energy Performance
Building Operation and Use and SMART information collected through information and
communication technologies (ICT) such as IoT - Internet of Things appliances)
7 httpwebtoolbuilding-typologyeupdfur 8 httpsibroad-projecteunewsthe-logbook-data-quest
D32 Technical Report on Market Needs and Gaps
1349
Within that project several regional initiatives were developed and should enter into operation soon
such as PORTAL CASA + in Portugal and the Woning Pass in the Flanders region (Belgium)9
Netherlands EPC open database On the website httpwwwenergielabelatlasnl all the EPCrsquos in
the Netherlands are publicly available This openly accessible register displays full coverage in energy
performance labels at building unit level based on either a theoretical EPC or effectively delivered
certificate The database also displays a breakdown of the labelled energy performance for each
designated area (at district levels) as well as the average EPC rank
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot
Source Energielabelatlas
Reporting on energy efficiency policies
IEA Building Energy Efficiency Database (BEEP) - discontinued The International Energy Agency
provides a database of all registered public policies regarding energy efficiency
httpswwwieaorgbeep It provides an overview analysis of each country and a detailed list of
existing building codes labels and incentives in place The last update of this database was is 2010
Odysee-MURE Policy database MURE (Mesures dUtilisation Rationnelle de lEnergie) provides
information on energy efficiency policies and measures that have been carried out in the Member
States of the European Union The information is accessible by query in the database10
9 Prototype Online Tool available here here and here 10 httpwwwmeasures-odyssee-mureeutopics-energy-efficiency-policyasp
D32 Technical Report on Market Needs and Gaps
1449
22 Processing
Market needs The EeDaPP initiative aims to provide relevant robust and reliable information to
assess EEM performance and risk evaluation The common database is an unprecedented collection
of reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
221 Market needs Establish a direct link between loan level credit and mortgage
risks property valuation and energy performance
The underlying business case of a future EEM product is that there is an impact of the energy
performance of a residential or a commercial building on the level of risk associated with the mortgage
financing the property and its energy efficiency Energy Efficient Mortgages are less risky to finance
and therefore less costly in capital at balance sheet level for the bank because both the property value
and the borrower risk profile are better compared to another loan all other things equal One of the
objectives of the EeDaPP initiative is to provide statistical evidence supporting this business case and
establishing a direct link between loan level credit and mortgage risks property valuation and energy
performance
The EeDaPP consortium partners are currently researching the correlation between energy efficiency
in buildings and the probability of default (PD) associated with the mortgage The research team is
currently investigating the Dutch residential market using European Data Warehouse loan data and
Dutch Energy Agency (RVO) data on energy performance using EPCs and their findings are to be
published in a later stage
222 Existing studies on the link between energy performance of buildings and
mortgage default
To date there exist very few research studies that investigate the relationship between energy
efficiency and default rates and those which do mainly focus on the United Statesrsquo (US) market The
main reason for this is that there is a significant lack of data available in Europe on both financial and
energy efficiency at loan level with a direct matching link (ie datasets that contain both energy and
financial loan level data)
Focussing on the European market a preliminary study11 published by Bank of England uses loan
performance data for residential mortgages in the entire UK (year-end 2017) matched with the energy
performance certificates (EPCs12) of the underlying properties and with information on the income of
the borrower at the time of mortgage origination EPCs in the UK rate properties from A (most
11 Available here 12 Data obtained here httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
D32 Technical Report on Market Needs and Gaps
1549
efficient) to G (least efficient) and provide information on the annual energy costs of a property
Properties are categorised into three buckets lsquoHigh energy efficiencyrsquo (EPC ratings of A B or C)
lsquoMedium energy efficiencyrsquo (EPC rating of D) and lsquoLow energy efficiencyrsquo (EPC ratings of E F or G) For
example the annual energy bill of a highly energy-efficient four-bedroomed house is on average GBP
1080 lower than for a four-bedroomed house with low energy efficiency
Table 3 Annual energy costs (in GBP) by type and energy efficiency of the property
Type of property High energy efficiency
Medium energy
efficiency
Low energy
efficiency
(EPC rating A-C) (EPC rating D) (EPC rating E-G)
2-bedroomed flat pound417 pound676 pound1023
3-bedroomed house pound578 pound891 pound1340
4-bedroomed house pound695 pound1130 pound1775
Source Bank Underground
By using univariate comparisons the study shows that about 093 of residential mortgages against
energy-efficient properties are in payment arrears This share is 021 percentage points lower than
the share of mortgages against energy-inefficient properties which is 114 This difference is
statistically significant at the one percent level In Figure 3 the black dot illustrates this difference
The black bar shows the 99 confidence interval
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency)
Source Bank Underground
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
949
Table 2 Existing Data Templates
By fulfilling their reporting duties for their financial review either at loan level or at portfolio level
lending institutions can rely on data providers and repositories
Data repositories are directly involved in the development of a standardised data platform for Energy
Efficient Mortgages because of their extensive experience in defining reporting criteria and formats
and due to their implicit existing and often long-standing relationships with data owners (or data
providers which provide the data on behalf of the owner) in other words banks This means they are
uniquely positioned to explain the benefits to their data owners of the provision of this data and to
actively encourage data owners to provide this data Data repositories are furthermore crucial in
promoting the availability of additional robust and reliable energy efficiency data related to
residential and commercial mortgage loans and related debt instruments to their extensive network
of users eg lenders issuers investors rating agencies and central banks etc2
Credit reference agencies or Credit bureaux in some countries are companies which store
consumersrsquo utilities payment data with the purpose of credit scoring and other services (for example
fraud prevention) According to an ACCIS survey conducted in 2018 countries where energy utilities
supply payment data are Austria the Czech Republic Denmark Germany Iceland Poland Romania
Spain Switzerland and the United Kingdom Many banks are already in a business relationship with
2 Members of the EeDaPP Consortium European DataWarehouse Hypoport TXS CRIF
Current existing data-templates
Description Link
STS Residential Draft Template
Regulation shall apply to securitisations entered into on or after 1 January 2019
httpswwwesmaeuropaeupolicy-activitiessecuritisation
European Central Bank (EDW) Templates
The loan-level reporting requirements started on 3 January 2013 for RMBS and on 1 March 2013 for CMBS
httpswwwecbeuropaeupaymcollloanleveltransmissionhtmlindexenhtml
Rating Agency Templates
Quite similar and recently in most cases very similar to ECB loan level template (see above)
Not public
HTT NTT Harmonised investor report (HTT) and national investor report (for Dutch issuers available on issuer-website)
httpswwwcoveredbondlabelcomissuersharmonised-transparency-template
DSA Dutch national standard for investor reports used for securitised transactions
httpswwwdutchsecuritisationnlinvestor-reporting
AnaCredit Regulation
Dataset containing detailed information on individual bank loans in the euro area
httpswwwecbeuropaeustatsmoney_credit_bankinganacredithtmlindexenhtml
Source EeDaPP Consortium
D32 Technical Report on Market Needs and Gaps
1049
credit reference agencies and therefore they could represent an option to access the payment data
and subsequently use payments as a proxy to calculate savings
Reporting of the property prices and valuations
Databases at property level on real estate prices and characteristics exist at national level but are
gathered and stored by different actors in different EU countries Access is made publicly available for
research and commercial purposes in some countries but not all (free access in the UK and
Netherlands for a fee in France etc)
Examples of (semi-) public registers
- Notary transaction databases (France Belgium)
- Real-estate data providers (the Netherlands)
- Public institutions (eg the Royal Mail in the United Kingdom)
Real-estate data providers are independent technology companies specialising in the statistical
analysis and valuation of real estate Such companies can perform Automated Valuation Models
(AVM) for valuation of individual homes Their services can be used by rating agencies mortgage
lenders investors intermediaries validation institutes housing corporations consumer
organisations real estate companies brokers government agencies and regulators The European
AVM Alliance (EAA) was launched as a pan-European initiative at the end of 2012 with its mission
being to promote and standardise the usage of AVMs resulting in a consistent approach to automated
valuations in Europe EAA members include Calcasa (the Netherlands) Hometrack (the United
Kingdom) Eiendomsverdi (Norway) Vaumlrderingsdata (Sweden) CRIF (Italy) Tinsa (Spain) On-Geo
(Germany and Austria)
Reporting and data tools on the energy performance of the building stock
EU Building Stock Observatory The European Commission and the Building Performance Institute
Europe (BPIE) launched its Building Stock Observatory3 in November 2016 This constitutes an existing
platform to monitor and assess the energy performance of the existing building stock across Europe
To do so it assesses improvements in the energy efficiency of buildings and the impact of these on the
actual energy consumption of the building sector overall The Observatory contains a database a data
mapper and provides factsheets tracking
- Energy efficiency levels in buildings in individual EU countries and across the EU as a whole
- Different certification schemes (EPCs and nearly Zero Energy Efficient Buildings - nZEBs4) and
how they are implemented in terms of the financing available for renovating buildings
3 httpseceuropaeuenergyeneubuildings 4 Nearly zero-energy buildings (nZEBs) have very high energy performance The low amount of energy that these buildings require comes mostly from renewable sources
D32 Technical Report on Market Needs and Gaps
1149
Energy poverty5 levels across the EU
Over recent years the BPIE contributed to the development of several tools within the framework of
EU-funded projects and more Among these the European project ZEBRA2020 was developed to
monitor the market uptake of nZEBs across Europe and covers seventeen European countries and
almost 90 of the European building stock (EU amp EEA) These countries have different climatic
conditions polices and economic capabilities The ZEBRA2020 data tool offers a user-friendly
presentation of indicators related to the overall building stock and to nZEB activities The first part of
the tool presents an overview of the current building stock including renovation and construction
and monitors Energy Performance Certificate (EPC) activities by country (focusing on the projectrsquos
target countries) The tool endeavours to overcome data gaps and provide comprehensive datasets
which support stakeholders in their efforts to consolidate the transition to an nZEB market The
second part of the tool determines relevant indicators of nZEB buildings constructed after 2010 in
selected European countries Furthermore it aims to provide information on best cases in Europe
thereby showing most recurring technologies materials and strategies towards the nZEB target The
tool distinguishes between residential and non-residential nZEB buildings and determines some of
the most significant indicators regarding energy performance passive and active solutions and
production of renewable energy
Reporting on energy efficiency upgrades
The De-risking Energy Efficiency Platform (DEEP)6 is an open source database for the monitoring and
benchmarking of energy efficiency investments that provides detailed analysis and evidence on the
performance of energy efficiency investments in both commercial and residential sectors to support
the assessment of the related benefits and financial risks The DEEP platform offers the following
services
- Key Figures Provides a quick overview of the buildings and industry projects in the DEEP
- Data Overview Provides a more comprehensive (but still aggregated) overview of the
energy efficiency projects in the DEEP
- Chart Views Allows the user to view and filter a number of predefined charts for buildings
and industry energy efficiency projects
- Add and Manage Projects Data providers can upload and manage data on their energy
efficiency projects
- Analysis Toolbox Allows users to create charts in a dynamic and highly customisable
manner
5 Energy poverty is a multi-dimensional concept based on several prices income housing and living condition indicators More information can be found here 6 httpsdeepeefigeu
D32 Technical Report on Market Needs and Gaps
1249
- Benchmark Projects Allows users to benchmark their own projects and portfolios of
projects against a selected group of reference projects from the DEEP database
The EEFIG DEEP platform reports key financial and energy indicators from over 5000 energy efficiency
projects in buildings including almost 2000 residential multi-family buildings financed and developed
between 2012 and 2016 The data on energy efficiency projects included in the DEEP has been
provided by public and private investment funds and financial institutions national and regional
authorities as well as energy efficiency solution providers Data is stored and managed at the
European Commission level within DG Energy
Building Typology and Energy Consumption data portal TABULA7 as part of the EU-funded research
projects (2009-2012) TABULA residential building typologies have been developed for 13 European
countries Each national typology consists of a classification scheme grouping buildings according to
their size age and further parameters and a set of exemplary buildings representing the building
types These have been published by the project partners in national Building Typology Brochures
written in their respective languages As a common element all brochures contain double page
ldquoBuilding Display Sheetsrdquo for all example buildings on which energy related features and the effects
of refurbishment measures are illustrated graphically With a view to exchanging information at
European level the TABULA WebTool provides an online calculation of the exemplary buildings from
all countries displaying their energy related features and the possible energy savings that could be
realised by implementing refurbishment measures The basis of the TABULA WebTool is a simple and
transparent reference procedure for calculating the energy need the energy use by energyware and
the energyware assessment (primary energy carbon dioxide costs) The tool also provides an
estimate of the energy savings per msup2 per year if the selected dwelling undergoes energy upgrades
(classified in three categories existing state usual refurbishment and advanced refurbishment)
Individual Building Renovation Roadmap (iBROAD) Building data passport (Logbook)8 The iBRoad
project works on developing an Individual Building Renovation Roadmap for single-family houses This
tool provides a customised renovation plan over a long-term period (10-20 years) The renovation
roadmap is combined with a building logbook a repository where all the buildingrsquos related information
can be stored and continuously updated The type of information stored in the logbook and its
functions can evolve over time and could range from energy production and consumption to
equipment maintenance as well as insurance property plans and obligations energy bills smart
meter data and links to available financing options for renovation projects (eg green loans
incentives tax credits) The logbook will collect and structure information in five modules (General
and administrative information Building construction information Building Energy Performance
Building Operation and Use and SMART information collected through information and
communication technologies (ICT) such as IoT - Internet of Things appliances)
7 httpwebtoolbuilding-typologyeupdfur 8 httpsibroad-projecteunewsthe-logbook-data-quest
D32 Technical Report on Market Needs and Gaps
1349
Within that project several regional initiatives were developed and should enter into operation soon
such as PORTAL CASA + in Portugal and the Woning Pass in the Flanders region (Belgium)9
Netherlands EPC open database On the website httpwwwenergielabelatlasnl all the EPCrsquos in
the Netherlands are publicly available This openly accessible register displays full coverage in energy
performance labels at building unit level based on either a theoretical EPC or effectively delivered
certificate The database also displays a breakdown of the labelled energy performance for each
designated area (at district levels) as well as the average EPC rank
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot
Source Energielabelatlas
Reporting on energy efficiency policies
IEA Building Energy Efficiency Database (BEEP) - discontinued The International Energy Agency
provides a database of all registered public policies regarding energy efficiency
httpswwwieaorgbeep It provides an overview analysis of each country and a detailed list of
existing building codes labels and incentives in place The last update of this database was is 2010
Odysee-MURE Policy database MURE (Mesures dUtilisation Rationnelle de lEnergie) provides
information on energy efficiency policies and measures that have been carried out in the Member
States of the European Union The information is accessible by query in the database10
9 Prototype Online Tool available here here and here 10 httpwwwmeasures-odyssee-mureeutopics-energy-efficiency-policyasp
D32 Technical Report on Market Needs and Gaps
1449
22 Processing
Market needs The EeDaPP initiative aims to provide relevant robust and reliable information to
assess EEM performance and risk evaluation The common database is an unprecedented collection
of reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
221 Market needs Establish a direct link between loan level credit and mortgage
risks property valuation and energy performance
The underlying business case of a future EEM product is that there is an impact of the energy
performance of a residential or a commercial building on the level of risk associated with the mortgage
financing the property and its energy efficiency Energy Efficient Mortgages are less risky to finance
and therefore less costly in capital at balance sheet level for the bank because both the property value
and the borrower risk profile are better compared to another loan all other things equal One of the
objectives of the EeDaPP initiative is to provide statistical evidence supporting this business case and
establishing a direct link between loan level credit and mortgage risks property valuation and energy
performance
The EeDaPP consortium partners are currently researching the correlation between energy efficiency
in buildings and the probability of default (PD) associated with the mortgage The research team is
currently investigating the Dutch residential market using European Data Warehouse loan data and
Dutch Energy Agency (RVO) data on energy performance using EPCs and their findings are to be
published in a later stage
222 Existing studies on the link between energy performance of buildings and
mortgage default
To date there exist very few research studies that investigate the relationship between energy
efficiency and default rates and those which do mainly focus on the United Statesrsquo (US) market The
main reason for this is that there is a significant lack of data available in Europe on both financial and
energy efficiency at loan level with a direct matching link (ie datasets that contain both energy and
financial loan level data)
Focussing on the European market a preliminary study11 published by Bank of England uses loan
performance data for residential mortgages in the entire UK (year-end 2017) matched with the energy
performance certificates (EPCs12) of the underlying properties and with information on the income of
the borrower at the time of mortgage origination EPCs in the UK rate properties from A (most
11 Available here 12 Data obtained here httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
D32 Technical Report on Market Needs and Gaps
1549
efficient) to G (least efficient) and provide information on the annual energy costs of a property
Properties are categorised into three buckets lsquoHigh energy efficiencyrsquo (EPC ratings of A B or C)
lsquoMedium energy efficiencyrsquo (EPC rating of D) and lsquoLow energy efficiencyrsquo (EPC ratings of E F or G) For
example the annual energy bill of a highly energy-efficient four-bedroomed house is on average GBP
1080 lower than for a four-bedroomed house with low energy efficiency
Table 3 Annual energy costs (in GBP) by type and energy efficiency of the property
Type of property High energy efficiency
Medium energy
efficiency
Low energy
efficiency
(EPC rating A-C) (EPC rating D) (EPC rating E-G)
2-bedroomed flat pound417 pound676 pound1023
3-bedroomed house pound578 pound891 pound1340
4-bedroomed house pound695 pound1130 pound1775
Source Bank Underground
By using univariate comparisons the study shows that about 093 of residential mortgages against
energy-efficient properties are in payment arrears This share is 021 percentage points lower than
the share of mortgages against energy-inefficient properties which is 114 This difference is
statistically significant at the one percent level In Figure 3 the black dot illustrates this difference
The black bar shows the 99 confidence interval
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency)
Source Bank Underground
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
1049
credit reference agencies and therefore they could represent an option to access the payment data
and subsequently use payments as a proxy to calculate savings
Reporting of the property prices and valuations
Databases at property level on real estate prices and characteristics exist at national level but are
gathered and stored by different actors in different EU countries Access is made publicly available for
research and commercial purposes in some countries but not all (free access in the UK and
Netherlands for a fee in France etc)
Examples of (semi-) public registers
- Notary transaction databases (France Belgium)
- Real-estate data providers (the Netherlands)
- Public institutions (eg the Royal Mail in the United Kingdom)
Real-estate data providers are independent technology companies specialising in the statistical
analysis and valuation of real estate Such companies can perform Automated Valuation Models
(AVM) for valuation of individual homes Their services can be used by rating agencies mortgage
lenders investors intermediaries validation institutes housing corporations consumer
organisations real estate companies brokers government agencies and regulators The European
AVM Alliance (EAA) was launched as a pan-European initiative at the end of 2012 with its mission
being to promote and standardise the usage of AVMs resulting in a consistent approach to automated
valuations in Europe EAA members include Calcasa (the Netherlands) Hometrack (the United
Kingdom) Eiendomsverdi (Norway) Vaumlrderingsdata (Sweden) CRIF (Italy) Tinsa (Spain) On-Geo
(Germany and Austria)
Reporting and data tools on the energy performance of the building stock
EU Building Stock Observatory The European Commission and the Building Performance Institute
Europe (BPIE) launched its Building Stock Observatory3 in November 2016 This constitutes an existing
platform to monitor and assess the energy performance of the existing building stock across Europe
To do so it assesses improvements in the energy efficiency of buildings and the impact of these on the
actual energy consumption of the building sector overall The Observatory contains a database a data
mapper and provides factsheets tracking
- Energy efficiency levels in buildings in individual EU countries and across the EU as a whole
- Different certification schemes (EPCs and nearly Zero Energy Efficient Buildings - nZEBs4) and
how they are implemented in terms of the financing available for renovating buildings
3 httpseceuropaeuenergyeneubuildings 4 Nearly zero-energy buildings (nZEBs) have very high energy performance The low amount of energy that these buildings require comes mostly from renewable sources
D32 Technical Report on Market Needs and Gaps
1149
Energy poverty5 levels across the EU
Over recent years the BPIE contributed to the development of several tools within the framework of
EU-funded projects and more Among these the European project ZEBRA2020 was developed to
monitor the market uptake of nZEBs across Europe and covers seventeen European countries and
almost 90 of the European building stock (EU amp EEA) These countries have different climatic
conditions polices and economic capabilities The ZEBRA2020 data tool offers a user-friendly
presentation of indicators related to the overall building stock and to nZEB activities The first part of
the tool presents an overview of the current building stock including renovation and construction
and monitors Energy Performance Certificate (EPC) activities by country (focusing on the projectrsquos
target countries) The tool endeavours to overcome data gaps and provide comprehensive datasets
which support stakeholders in their efforts to consolidate the transition to an nZEB market The
second part of the tool determines relevant indicators of nZEB buildings constructed after 2010 in
selected European countries Furthermore it aims to provide information on best cases in Europe
thereby showing most recurring technologies materials and strategies towards the nZEB target The
tool distinguishes between residential and non-residential nZEB buildings and determines some of
the most significant indicators regarding energy performance passive and active solutions and
production of renewable energy
Reporting on energy efficiency upgrades
The De-risking Energy Efficiency Platform (DEEP)6 is an open source database for the monitoring and
benchmarking of energy efficiency investments that provides detailed analysis and evidence on the
performance of energy efficiency investments in both commercial and residential sectors to support
the assessment of the related benefits and financial risks The DEEP platform offers the following
services
- Key Figures Provides a quick overview of the buildings and industry projects in the DEEP
- Data Overview Provides a more comprehensive (but still aggregated) overview of the
energy efficiency projects in the DEEP
- Chart Views Allows the user to view and filter a number of predefined charts for buildings
and industry energy efficiency projects
- Add and Manage Projects Data providers can upload and manage data on their energy
efficiency projects
- Analysis Toolbox Allows users to create charts in a dynamic and highly customisable
manner
5 Energy poverty is a multi-dimensional concept based on several prices income housing and living condition indicators More information can be found here 6 httpsdeepeefigeu
D32 Technical Report on Market Needs and Gaps
1249
- Benchmark Projects Allows users to benchmark their own projects and portfolios of
projects against a selected group of reference projects from the DEEP database
The EEFIG DEEP platform reports key financial and energy indicators from over 5000 energy efficiency
projects in buildings including almost 2000 residential multi-family buildings financed and developed
between 2012 and 2016 The data on energy efficiency projects included in the DEEP has been
provided by public and private investment funds and financial institutions national and regional
authorities as well as energy efficiency solution providers Data is stored and managed at the
European Commission level within DG Energy
Building Typology and Energy Consumption data portal TABULA7 as part of the EU-funded research
projects (2009-2012) TABULA residential building typologies have been developed for 13 European
countries Each national typology consists of a classification scheme grouping buildings according to
their size age and further parameters and a set of exemplary buildings representing the building
types These have been published by the project partners in national Building Typology Brochures
written in their respective languages As a common element all brochures contain double page
ldquoBuilding Display Sheetsrdquo for all example buildings on which energy related features and the effects
of refurbishment measures are illustrated graphically With a view to exchanging information at
European level the TABULA WebTool provides an online calculation of the exemplary buildings from
all countries displaying their energy related features and the possible energy savings that could be
realised by implementing refurbishment measures The basis of the TABULA WebTool is a simple and
transparent reference procedure for calculating the energy need the energy use by energyware and
the energyware assessment (primary energy carbon dioxide costs) The tool also provides an
estimate of the energy savings per msup2 per year if the selected dwelling undergoes energy upgrades
(classified in three categories existing state usual refurbishment and advanced refurbishment)
Individual Building Renovation Roadmap (iBROAD) Building data passport (Logbook)8 The iBRoad
project works on developing an Individual Building Renovation Roadmap for single-family houses This
tool provides a customised renovation plan over a long-term period (10-20 years) The renovation
roadmap is combined with a building logbook a repository where all the buildingrsquos related information
can be stored and continuously updated The type of information stored in the logbook and its
functions can evolve over time and could range from energy production and consumption to
equipment maintenance as well as insurance property plans and obligations energy bills smart
meter data and links to available financing options for renovation projects (eg green loans
incentives tax credits) The logbook will collect and structure information in five modules (General
and administrative information Building construction information Building Energy Performance
Building Operation and Use and SMART information collected through information and
communication technologies (ICT) such as IoT - Internet of Things appliances)
7 httpwebtoolbuilding-typologyeupdfur 8 httpsibroad-projecteunewsthe-logbook-data-quest
D32 Technical Report on Market Needs and Gaps
1349
Within that project several regional initiatives were developed and should enter into operation soon
such as PORTAL CASA + in Portugal and the Woning Pass in the Flanders region (Belgium)9
Netherlands EPC open database On the website httpwwwenergielabelatlasnl all the EPCrsquos in
the Netherlands are publicly available This openly accessible register displays full coverage in energy
performance labels at building unit level based on either a theoretical EPC or effectively delivered
certificate The database also displays a breakdown of the labelled energy performance for each
designated area (at district levels) as well as the average EPC rank
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot
Source Energielabelatlas
Reporting on energy efficiency policies
IEA Building Energy Efficiency Database (BEEP) - discontinued The International Energy Agency
provides a database of all registered public policies regarding energy efficiency
httpswwwieaorgbeep It provides an overview analysis of each country and a detailed list of
existing building codes labels and incentives in place The last update of this database was is 2010
Odysee-MURE Policy database MURE (Mesures dUtilisation Rationnelle de lEnergie) provides
information on energy efficiency policies and measures that have been carried out in the Member
States of the European Union The information is accessible by query in the database10
9 Prototype Online Tool available here here and here 10 httpwwwmeasures-odyssee-mureeutopics-energy-efficiency-policyasp
D32 Technical Report on Market Needs and Gaps
1449
22 Processing
Market needs The EeDaPP initiative aims to provide relevant robust and reliable information to
assess EEM performance and risk evaluation The common database is an unprecedented collection
of reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
221 Market needs Establish a direct link between loan level credit and mortgage
risks property valuation and energy performance
The underlying business case of a future EEM product is that there is an impact of the energy
performance of a residential or a commercial building on the level of risk associated with the mortgage
financing the property and its energy efficiency Energy Efficient Mortgages are less risky to finance
and therefore less costly in capital at balance sheet level for the bank because both the property value
and the borrower risk profile are better compared to another loan all other things equal One of the
objectives of the EeDaPP initiative is to provide statistical evidence supporting this business case and
establishing a direct link between loan level credit and mortgage risks property valuation and energy
performance
The EeDaPP consortium partners are currently researching the correlation between energy efficiency
in buildings and the probability of default (PD) associated with the mortgage The research team is
currently investigating the Dutch residential market using European Data Warehouse loan data and
Dutch Energy Agency (RVO) data on energy performance using EPCs and their findings are to be
published in a later stage
222 Existing studies on the link between energy performance of buildings and
mortgage default
To date there exist very few research studies that investigate the relationship between energy
efficiency and default rates and those which do mainly focus on the United Statesrsquo (US) market The
main reason for this is that there is a significant lack of data available in Europe on both financial and
energy efficiency at loan level with a direct matching link (ie datasets that contain both energy and
financial loan level data)
Focussing on the European market a preliminary study11 published by Bank of England uses loan
performance data for residential mortgages in the entire UK (year-end 2017) matched with the energy
performance certificates (EPCs12) of the underlying properties and with information on the income of
the borrower at the time of mortgage origination EPCs in the UK rate properties from A (most
11 Available here 12 Data obtained here httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
D32 Technical Report on Market Needs and Gaps
1549
efficient) to G (least efficient) and provide information on the annual energy costs of a property
Properties are categorised into three buckets lsquoHigh energy efficiencyrsquo (EPC ratings of A B or C)
lsquoMedium energy efficiencyrsquo (EPC rating of D) and lsquoLow energy efficiencyrsquo (EPC ratings of E F or G) For
example the annual energy bill of a highly energy-efficient four-bedroomed house is on average GBP
1080 lower than for a four-bedroomed house with low energy efficiency
Table 3 Annual energy costs (in GBP) by type and energy efficiency of the property
Type of property High energy efficiency
Medium energy
efficiency
Low energy
efficiency
(EPC rating A-C) (EPC rating D) (EPC rating E-G)
2-bedroomed flat pound417 pound676 pound1023
3-bedroomed house pound578 pound891 pound1340
4-bedroomed house pound695 pound1130 pound1775
Source Bank Underground
By using univariate comparisons the study shows that about 093 of residential mortgages against
energy-efficient properties are in payment arrears This share is 021 percentage points lower than
the share of mortgages against energy-inefficient properties which is 114 This difference is
statistically significant at the one percent level In Figure 3 the black dot illustrates this difference
The black bar shows the 99 confidence interval
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency)
Source Bank Underground
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
1149
Energy poverty5 levels across the EU
Over recent years the BPIE contributed to the development of several tools within the framework of
EU-funded projects and more Among these the European project ZEBRA2020 was developed to
monitor the market uptake of nZEBs across Europe and covers seventeen European countries and
almost 90 of the European building stock (EU amp EEA) These countries have different climatic
conditions polices and economic capabilities The ZEBRA2020 data tool offers a user-friendly
presentation of indicators related to the overall building stock and to nZEB activities The first part of
the tool presents an overview of the current building stock including renovation and construction
and monitors Energy Performance Certificate (EPC) activities by country (focusing on the projectrsquos
target countries) The tool endeavours to overcome data gaps and provide comprehensive datasets
which support stakeholders in their efforts to consolidate the transition to an nZEB market The
second part of the tool determines relevant indicators of nZEB buildings constructed after 2010 in
selected European countries Furthermore it aims to provide information on best cases in Europe
thereby showing most recurring technologies materials and strategies towards the nZEB target The
tool distinguishes between residential and non-residential nZEB buildings and determines some of
the most significant indicators regarding energy performance passive and active solutions and
production of renewable energy
Reporting on energy efficiency upgrades
The De-risking Energy Efficiency Platform (DEEP)6 is an open source database for the monitoring and
benchmarking of energy efficiency investments that provides detailed analysis and evidence on the
performance of energy efficiency investments in both commercial and residential sectors to support
the assessment of the related benefits and financial risks The DEEP platform offers the following
services
- Key Figures Provides a quick overview of the buildings and industry projects in the DEEP
- Data Overview Provides a more comprehensive (but still aggregated) overview of the
energy efficiency projects in the DEEP
- Chart Views Allows the user to view and filter a number of predefined charts for buildings
and industry energy efficiency projects
- Add and Manage Projects Data providers can upload and manage data on their energy
efficiency projects
- Analysis Toolbox Allows users to create charts in a dynamic and highly customisable
manner
5 Energy poverty is a multi-dimensional concept based on several prices income housing and living condition indicators More information can be found here 6 httpsdeepeefigeu
D32 Technical Report on Market Needs and Gaps
1249
- Benchmark Projects Allows users to benchmark their own projects and portfolios of
projects against a selected group of reference projects from the DEEP database
The EEFIG DEEP platform reports key financial and energy indicators from over 5000 energy efficiency
projects in buildings including almost 2000 residential multi-family buildings financed and developed
between 2012 and 2016 The data on energy efficiency projects included in the DEEP has been
provided by public and private investment funds and financial institutions national and regional
authorities as well as energy efficiency solution providers Data is stored and managed at the
European Commission level within DG Energy
Building Typology and Energy Consumption data portal TABULA7 as part of the EU-funded research
projects (2009-2012) TABULA residential building typologies have been developed for 13 European
countries Each national typology consists of a classification scheme grouping buildings according to
their size age and further parameters and a set of exemplary buildings representing the building
types These have been published by the project partners in national Building Typology Brochures
written in their respective languages As a common element all brochures contain double page
ldquoBuilding Display Sheetsrdquo for all example buildings on which energy related features and the effects
of refurbishment measures are illustrated graphically With a view to exchanging information at
European level the TABULA WebTool provides an online calculation of the exemplary buildings from
all countries displaying their energy related features and the possible energy savings that could be
realised by implementing refurbishment measures The basis of the TABULA WebTool is a simple and
transparent reference procedure for calculating the energy need the energy use by energyware and
the energyware assessment (primary energy carbon dioxide costs) The tool also provides an
estimate of the energy savings per msup2 per year if the selected dwelling undergoes energy upgrades
(classified in three categories existing state usual refurbishment and advanced refurbishment)
Individual Building Renovation Roadmap (iBROAD) Building data passport (Logbook)8 The iBRoad
project works on developing an Individual Building Renovation Roadmap for single-family houses This
tool provides a customised renovation plan over a long-term period (10-20 years) The renovation
roadmap is combined with a building logbook a repository where all the buildingrsquos related information
can be stored and continuously updated The type of information stored in the logbook and its
functions can evolve over time and could range from energy production and consumption to
equipment maintenance as well as insurance property plans and obligations energy bills smart
meter data and links to available financing options for renovation projects (eg green loans
incentives tax credits) The logbook will collect and structure information in five modules (General
and administrative information Building construction information Building Energy Performance
Building Operation and Use and SMART information collected through information and
communication technologies (ICT) such as IoT - Internet of Things appliances)
7 httpwebtoolbuilding-typologyeupdfur 8 httpsibroad-projecteunewsthe-logbook-data-quest
D32 Technical Report on Market Needs and Gaps
1349
Within that project several regional initiatives were developed and should enter into operation soon
such as PORTAL CASA + in Portugal and the Woning Pass in the Flanders region (Belgium)9
Netherlands EPC open database On the website httpwwwenergielabelatlasnl all the EPCrsquos in
the Netherlands are publicly available This openly accessible register displays full coverage in energy
performance labels at building unit level based on either a theoretical EPC or effectively delivered
certificate The database also displays a breakdown of the labelled energy performance for each
designated area (at district levels) as well as the average EPC rank
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot
Source Energielabelatlas
Reporting on energy efficiency policies
IEA Building Energy Efficiency Database (BEEP) - discontinued The International Energy Agency
provides a database of all registered public policies regarding energy efficiency
httpswwwieaorgbeep It provides an overview analysis of each country and a detailed list of
existing building codes labels and incentives in place The last update of this database was is 2010
Odysee-MURE Policy database MURE (Mesures dUtilisation Rationnelle de lEnergie) provides
information on energy efficiency policies and measures that have been carried out in the Member
States of the European Union The information is accessible by query in the database10
9 Prototype Online Tool available here here and here 10 httpwwwmeasures-odyssee-mureeutopics-energy-efficiency-policyasp
D32 Technical Report on Market Needs and Gaps
1449
22 Processing
Market needs The EeDaPP initiative aims to provide relevant robust and reliable information to
assess EEM performance and risk evaluation The common database is an unprecedented collection
of reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
221 Market needs Establish a direct link between loan level credit and mortgage
risks property valuation and energy performance
The underlying business case of a future EEM product is that there is an impact of the energy
performance of a residential or a commercial building on the level of risk associated with the mortgage
financing the property and its energy efficiency Energy Efficient Mortgages are less risky to finance
and therefore less costly in capital at balance sheet level for the bank because both the property value
and the borrower risk profile are better compared to another loan all other things equal One of the
objectives of the EeDaPP initiative is to provide statistical evidence supporting this business case and
establishing a direct link between loan level credit and mortgage risks property valuation and energy
performance
The EeDaPP consortium partners are currently researching the correlation between energy efficiency
in buildings and the probability of default (PD) associated with the mortgage The research team is
currently investigating the Dutch residential market using European Data Warehouse loan data and
Dutch Energy Agency (RVO) data on energy performance using EPCs and their findings are to be
published in a later stage
222 Existing studies on the link between energy performance of buildings and
mortgage default
To date there exist very few research studies that investigate the relationship between energy
efficiency and default rates and those which do mainly focus on the United Statesrsquo (US) market The
main reason for this is that there is a significant lack of data available in Europe on both financial and
energy efficiency at loan level with a direct matching link (ie datasets that contain both energy and
financial loan level data)
Focussing on the European market a preliminary study11 published by Bank of England uses loan
performance data for residential mortgages in the entire UK (year-end 2017) matched with the energy
performance certificates (EPCs12) of the underlying properties and with information on the income of
the borrower at the time of mortgage origination EPCs in the UK rate properties from A (most
11 Available here 12 Data obtained here httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
D32 Technical Report on Market Needs and Gaps
1549
efficient) to G (least efficient) and provide information on the annual energy costs of a property
Properties are categorised into three buckets lsquoHigh energy efficiencyrsquo (EPC ratings of A B or C)
lsquoMedium energy efficiencyrsquo (EPC rating of D) and lsquoLow energy efficiencyrsquo (EPC ratings of E F or G) For
example the annual energy bill of a highly energy-efficient four-bedroomed house is on average GBP
1080 lower than for a four-bedroomed house with low energy efficiency
Table 3 Annual energy costs (in GBP) by type and energy efficiency of the property
Type of property High energy efficiency
Medium energy
efficiency
Low energy
efficiency
(EPC rating A-C) (EPC rating D) (EPC rating E-G)
2-bedroomed flat pound417 pound676 pound1023
3-bedroomed house pound578 pound891 pound1340
4-bedroomed house pound695 pound1130 pound1775
Source Bank Underground
By using univariate comparisons the study shows that about 093 of residential mortgages against
energy-efficient properties are in payment arrears This share is 021 percentage points lower than
the share of mortgages against energy-inefficient properties which is 114 This difference is
statistically significant at the one percent level In Figure 3 the black dot illustrates this difference
The black bar shows the 99 confidence interval
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency)
Source Bank Underground
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
1249
- Benchmark Projects Allows users to benchmark their own projects and portfolios of
projects against a selected group of reference projects from the DEEP database
The EEFIG DEEP platform reports key financial and energy indicators from over 5000 energy efficiency
projects in buildings including almost 2000 residential multi-family buildings financed and developed
between 2012 and 2016 The data on energy efficiency projects included in the DEEP has been
provided by public and private investment funds and financial institutions national and regional
authorities as well as energy efficiency solution providers Data is stored and managed at the
European Commission level within DG Energy
Building Typology and Energy Consumption data portal TABULA7 as part of the EU-funded research
projects (2009-2012) TABULA residential building typologies have been developed for 13 European
countries Each national typology consists of a classification scheme grouping buildings according to
their size age and further parameters and a set of exemplary buildings representing the building
types These have been published by the project partners in national Building Typology Brochures
written in their respective languages As a common element all brochures contain double page
ldquoBuilding Display Sheetsrdquo for all example buildings on which energy related features and the effects
of refurbishment measures are illustrated graphically With a view to exchanging information at
European level the TABULA WebTool provides an online calculation of the exemplary buildings from
all countries displaying their energy related features and the possible energy savings that could be
realised by implementing refurbishment measures The basis of the TABULA WebTool is a simple and
transparent reference procedure for calculating the energy need the energy use by energyware and
the energyware assessment (primary energy carbon dioxide costs) The tool also provides an
estimate of the energy savings per msup2 per year if the selected dwelling undergoes energy upgrades
(classified in three categories existing state usual refurbishment and advanced refurbishment)
Individual Building Renovation Roadmap (iBROAD) Building data passport (Logbook)8 The iBRoad
project works on developing an Individual Building Renovation Roadmap for single-family houses This
tool provides a customised renovation plan over a long-term period (10-20 years) The renovation
roadmap is combined with a building logbook a repository where all the buildingrsquos related information
can be stored and continuously updated The type of information stored in the logbook and its
functions can evolve over time and could range from energy production and consumption to
equipment maintenance as well as insurance property plans and obligations energy bills smart
meter data and links to available financing options for renovation projects (eg green loans
incentives tax credits) The logbook will collect and structure information in five modules (General
and administrative information Building construction information Building Energy Performance
Building Operation and Use and SMART information collected through information and
communication technologies (ICT) such as IoT - Internet of Things appliances)
7 httpwebtoolbuilding-typologyeupdfur 8 httpsibroad-projecteunewsthe-logbook-data-quest
D32 Technical Report on Market Needs and Gaps
1349
Within that project several regional initiatives were developed and should enter into operation soon
such as PORTAL CASA + in Portugal and the Woning Pass in the Flanders region (Belgium)9
Netherlands EPC open database On the website httpwwwenergielabelatlasnl all the EPCrsquos in
the Netherlands are publicly available This openly accessible register displays full coverage in energy
performance labels at building unit level based on either a theoretical EPC or effectively delivered
certificate The database also displays a breakdown of the labelled energy performance for each
designated area (at district levels) as well as the average EPC rank
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot
Source Energielabelatlas
Reporting on energy efficiency policies
IEA Building Energy Efficiency Database (BEEP) - discontinued The International Energy Agency
provides a database of all registered public policies regarding energy efficiency
httpswwwieaorgbeep It provides an overview analysis of each country and a detailed list of
existing building codes labels and incentives in place The last update of this database was is 2010
Odysee-MURE Policy database MURE (Mesures dUtilisation Rationnelle de lEnergie) provides
information on energy efficiency policies and measures that have been carried out in the Member
States of the European Union The information is accessible by query in the database10
9 Prototype Online Tool available here here and here 10 httpwwwmeasures-odyssee-mureeutopics-energy-efficiency-policyasp
D32 Technical Report on Market Needs and Gaps
1449
22 Processing
Market needs The EeDaPP initiative aims to provide relevant robust and reliable information to
assess EEM performance and risk evaluation The common database is an unprecedented collection
of reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
221 Market needs Establish a direct link between loan level credit and mortgage
risks property valuation and energy performance
The underlying business case of a future EEM product is that there is an impact of the energy
performance of a residential or a commercial building on the level of risk associated with the mortgage
financing the property and its energy efficiency Energy Efficient Mortgages are less risky to finance
and therefore less costly in capital at balance sheet level for the bank because both the property value
and the borrower risk profile are better compared to another loan all other things equal One of the
objectives of the EeDaPP initiative is to provide statistical evidence supporting this business case and
establishing a direct link between loan level credit and mortgage risks property valuation and energy
performance
The EeDaPP consortium partners are currently researching the correlation between energy efficiency
in buildings and the probability of default (PD) associated with the mortgage The research team is
currently investigating the Dutch residential market using European Data Warehouse loan data and
Dutch Energy Agency (RVO) data on energy performance using EPCs and their findings are to be
published in a later stage
222 Existing studies on the link between energy performance of buildings and
mortgage default
To date there exist very few research studies that investigate the relationship between energy
efficiency and default rates and those which do mainly focus on the United Statesrsquo (US) market The
main reason for this is that there is a significant lack of data available in Europe on both financial and
energy efficiency at loan level with a direct matching link (ie datasets that contain both energy and
financial loan level data)
Focussing on the European market a preliminary study11 published by Bank of England uses loan
performance data for residential mortgages in the entire UK (year-end 2017) matched with the energy
performance certificates (EPCs12) of the underlying properties and with information on the income of
the borrower at the time of mortgage origination EPCs in the UK rate properties from A (most
11 Available here 12 Data obtained here httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
D32 Technical Report on Market Needs and Gaps
1549
efficient) to G (least efficient) and provide information on the annual energy costs of a property
Properties are categorised into three buckets lsquoHigh energy efficiencyrsquo (EPC ratings of A B or C)
lsquoMedium energy efficiencyrsquo (EPC rating of D) and lsquoLow energy efficiencyrsquo (EPC ratings of E F or G) For
example the annual energy bill of a highly energy-efficient four-bedroomed house is on average GBP
1080 lower than for a four-bedroomed house with low energy efficiency
Table 3 Annual energy costs (in GBP) by type and energy efficiency of the property
Type of property High energy efficiency
Medium energy
efficiency
Low energy
efficiency
(EPC rating A-C) (EPC rating D) (EPC rating E-G)
2-bedroomed flat pound417 pound676 pound1023
3-bedroomed house pound578 pound891 pound1340
4-bedroomed house pound695 pound1130 pound1775
Source Bank Underground
By using univariate comparisons the study shows that about 093 of residential mortgages against
energy-efficient properties are in payment arrears This share is 021 percentage points lower than
the share of mortgages against energy-inefficient properties which is 114 This difference is
statistically significant at the one percent level In Figure 3 the black dot illustrates this difference
The black bar shows the 99 confidence interval
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency)
Source Bank Underground
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
1349
Within that project several regional initiatives were developed and should enter into operation soon
such as PORTAL CASA + in Portugal and the Woning Pass in the Flanders region (Belgium)9
Netherlands EPC open database On the website httpwwwenergielabelatlasnl all the EPCrsquos in
the Netherlands are publicly available This openly accessible register displays full coverage in energy
performance labels at building unit level based on either a theoretical EPC or effectively delivered
certificate The database also displays a breakdown of the labelled energy performance for each
designated area (at district levels) as well as the average EPC rank
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot
Source Energielabelatlas
Reporting on energy efficiency policies
IEA Building Energy Efficiency Database (BEEP) - discontinued The International Energy Agency
provides a database of all registered public policies regarding energy efficiency
httpswwwieaorgbeep It provides an overview analysis of each country and a detailed list of
existing building codes labels and incentives in place The last update of this database was is 2010
Odysee-MURE Policy database MURE (Mesures dUtilisation Rationnelle de lEnergie) provides
information on energy efficiency policies and measures that have been carried out in the Member
States of the European Union The information is accessible by query in the database10
9 Prototype Online Tool available here here and here 10 httpwwwmeasures-odyssee-mureeutopics-energy-efficiency-policyasp
D32 Technical Report on Market Needs and Gaps
1449
22 Processing
Market needs The EeDaPP initiative aims to provide relevant robust and reliable information to
assess EEM performance and risk evaluation The common database is an unprecedented collection
of reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
221 Market needs Establish a direct link between loan level credit and mortgage
risks property valuation and energy performance
The underlying business case of a future EEM product is that there is an impact of the energy
performance of a residential or a commercial building on the level of risk associated with the mortgage
financing the property and its energy efficiency Energy Efficient Mortgages are less risky to finance
and therefore less costly in capital at balance sheet level for the bank because both the property value
and the borrower risk profile are better compared to another loan all other things equal One of the
objectives of the EeDaPP initiative is to provide statistical evidence supporting this business case and
establishing a direct link between loan level credit and mortgage risks property valuation and energy
performance
The EeDaPP consortium partners are currently researching the correlation between energy efficiency
in buildings and the probability of default (PD) associated with the mortgage The research team is
currently investigating the Dutch residential market using European Data Warehouse loan data and
Dutch Energy Agency (RVO) data on energy performance using EPCs and their findings are to be
published in a later stage
222 Existing studies on the link between energy performance of buildings and
mortgage default
To date there exist very few research studies that investigate the relationship between energy
efficiency and default rates and those which do mainly focus on the United Statesrsquo (US) market The
main reason for this is that there is a significant lack of data available in Europe on both financial and
energy efficiency at loan level with a direct matching link (ie datasets that contain both energy and
financial loan level data)
Focussing on the European market a preliminary study11 published by Bank of England uses loan
performance data for residential mortgages in the entire UK (year-end 2017) matched with the energy
performance certificates (EPCs12) of the underlying properties and with information on the income of
the borrower at the time of mortgage origination EPCs in the UK rate properties from A (most
11 Available here 12 Data obtained here httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
D32 Technical Report on Market Needs and Gaps
1549
efficient) to G (least efficient) and provide information on the annual energy costs of a property
Properties are categorised into three buckets lsquoHigh energy efficiencyrsquo (EPC ratings of A B or C)
lsquoMedium energy efficiencyrsquo (EPC rating of D) and lsquoLow energy efficiencyrsquo (EPC ratings of E F or G) For
example the annual energy bill of a highly energy-efficient four-bedroomed house is on average GBP
1080 lower than for a four-bedroomed house with low energy efficiency
Table 3 Annual energy costs (in GBP) by type and energy efficiency of the property
Type of property High energy efficiency
Medium energy
efficiency
Low energy
efficiency
(EPC rating A-C) (EPC rating D) (EPC rating E-G)
2-bedroomed flat pound417 pound676 pound1023
3-bedroomed house pound578 pound891 pound1340
4-bedroomed house pound695 pound1130 pound1775
Source Bank Underground
By using univariate comparisons the study shows that about 093 of residential mortgages against
energy-efficient properties are in payment arrears This share is 021 percentage points lower than
the share of mortgages against energy-inefficient properties which is 114 This difference is
statistically significant at the one percent level In Figure 3 the black dot illustrates this difference
The black bar shows the 99 confidence interval
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency)
Source Bank Underground
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
1449
22 Processing
Market needs The EeDaPP initiative aims to provide relevant robust and reliable information to
assess EEM performance and risk evaluation The common database is an unprecedented collection
of reliable and harmonised energy efficiency and financial criteria which can be used to provide robust
empirical evidence of the correlation between energy performance and mortgage risk default
221 Market needs Establish a direct link between loan level credit and mortgage
risks property valuation and energy performance
The underlying business case of a future EEM product is that there is an impact of the energy
performance of a residential or a commercial building on the level of risk associated with the mortgage
financing the property and its energy efficiency Energy Efficient Mortgages are less risky to finance
and therefore less costly in capital at balance sheet level for the bank because both the property value
and the borrower risk profile are better compared to another loan all other things equal One of the
objectives of the EeDaPP initiative is to provide statistical evidence supporting this business case and
establishing a direct link between loan level credit and mortgage risks property valuation and energy
performance
The EeDaPP consortium partners are currently researching the correlation between energy efficiency
in buildings and the probability of default (PD) associated with the mortgage The research team is
currently investigating the Dutch residential market using European Data Warehouse loan data and
Dutch Energy Agency (RVO) data on energy performance using EPCs and their findings are to be
published in a later stage
222 Existing studies on the link between energy performance of buildings and
mortgage default
To date there exist very few research studies that investigate the relationship between energy
efficiency and default rates and those which do mainly focus on the United Statesrsquo (US) market The
main reason for this is that there is a significant lack of data available in Europe on both financial and
energy efficiency at loan level with a direct matching link (ie datasets that contain both energy and
financial loan level data)
Focussing on the European market a preliminary study11 published by Bank of England uses loan
performance data for residential mortgages in the entire UK (year-end 2017) matched with the energy
performance certificates (EPCs12) of the underlying properties and with information on the income of
the borrower at the time of mortgage origination EPCs in the UK rate properties from A (most
11 Available here 12 Data obtained here httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
D32 Technical Report on Market Needs and Gaps
1549
efficient) to G (least efficient) and provide information on the annual energy costs of a property
Properties are categorised into three buckets lsquoHigh energy efficiencyrsquo (EPC ratings of A B or C)
lsquoMedium energy efficiencyrsquo (EPC rating of D) and lsquoLow energy efficiencyrsquo (EPC ratings of E F or G) For
example the annual energy bill of a highly energy-efficient four-bedroomed house is on average GBP
1080 lower than for a four-bedroomed house with low energy efficiency
Table 3 Annual energy costs (in GBP) by type and energy efficiency of the property
Type of property High energy efficiency
Medium energy
efficiency
Low energy
efficiency
(EPC rating A-C) (EPC rating D) (EPC rating E-G)
2-bedroomed flat pound417 pound676 pound1023
3-bedroomed house pound578 pound891 pound1340
4-bedroomed house pound695 pound1130 pound1775
Source Bank Underground
By using univariate comparisons the study shows that about 093 of residential mortgages against
energy-efficient properties are in payment arrears This share is 021 percentage points lower than
the share of mortgages against energy-inefficient properties which is 114 This difference is
statistically significant at the one percent level In Figure 3 the black dot illustrates this difference
The black bar shows the 99 confidence interval
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency)
Source Bank Underground
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
1549
efficient) to G (least efficient) and provide information on the annual energy costs of a property
Properties are categorised into three buckets lsquoHigh energy efficiencyrsquo (EPC ratings of A B or C)
lsquoMedium energy efficiencyrsquo (EPC rating of D) and lsquoLow energy efficiencyrsquo (EPC ratings of E F or G) For
example the annual energy bill of a highly energy-efficient four-bedroomed house is on average GBP
1080 lower than for a four-bedroomed house with low energy efficiency
Table 3 Annual energy costs (in GBP) by type and energy efficiency of the property
Type of property High energy efficiency
Medium energy
efficiency
Low energy
efficiency
(EPC rating A-C) (EPC rating D) (EPC rating E-G)
2-bedroomed flat pound417 pound676 pound1023
3-bedroomed house pound578 pound891 pound1340
4-bedroomed house pound695 pound1130 pound1775
Source Bank Underground
By using univariate comparisons the study shows that about 093 of residential mortgages against
energy-efficient properties are in payment arrears This share is 021 percentage points lower than
the share of mortgages against energy-inefficient properties which is 114 This difference is
statistically significant at the one percent level In Figure 3 the black dot illustrates this difference
The black bar shows the 99 confidence interval
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency)
Source Bank Underground
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
1649
223 Reporting on the financial performance and related risk of energy efficiency
investment and energy upgrades
Additional information is needed to provide a sound and robust assessment of the effect of energy
efficiency on the risk profile of the borrower and the underlying asset value This information relates
to energy performance upgrades to the type of renovation that needs to be undertaken the related
cost and rate of return as well as the additional sources of finance available that would reduce the
initial investment coming from the borrower The DEEP platform introduced earlier assesses the
profitability and the risk analysis of energy efficiency investments in housing in a static yet quantitative
format
23 Disclosure
Market Needs The green bond market is growing rapidly and is key to mobilise sustainable
investments It needs clear yet rigorous criteria for eligible assets the natural counterpart of the
liabilities (bonds) for each key sector (new and existing buildings in our case) and a harmonised and
transparent reporting process aligned with existing international standards regulatory
developments and market best practices
According to the IEA World Energy Investment 2018 report close to 60 of all investment in energy
efficiency was attributed to the building sector Yet the sector accounts only for 6 in the climate-
aligned bond universe (CBI Report September 201813) The green bond market although still in its
infancy is experiencing exponential growth The Climate Bond Initiative reports USD 155 bn worth of
green bonds outstanding as of year-end 2017 (+99 year on year on the first quarter 2018)
There is room and market potential to develop standards and a reporting protocol that will facilitate
the issuance of such bonds for financial institutions willing to use a dedicated funding tool to finance
their Energy Efficient Mortgage portfolios
The benefits of an energy efficient mortgage market can also be seen on the funding side attracting
new types of investors with the issuance of a new asset class that can be classified as a green bond
Indeed the vast majority of climate-aligned bonds outstanding (USD 72 bn in Q1 2018) is allocated to
fund certified buildings (57) and energy efficiency upgrades (40) the rest (3) being allocated to
certified building materials and LED manufactures The largest issuer is the USrsquo Fannie Mae which
dominates the sector with USD 377 bn green MBS outstanding allocated to loans for energy and water
efficiency and energy efficient mortgages The next largest issuers are BerlinHyp (DE) Obvion (NL) and
the Development Bank of Japan14
The EeDaPP initiative aims to provide its stakeholders with the tools necessary to establish impact
reporting disclosure standards and guidelines for funding certifications and labels for the dedicated
ldquogreen bondrdquo issuance In this context it is worth noting that the green bond market is almost entirely
13 httpswwwclimatebondsnetfilesreportscbi_sotm_2018_final_01g-webpdf 14 More details can be found in the previous EeDaPP publication
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
1749
documentation based - ie use of proceeds and that the tracking of the actual energy performance of
the underlying collateral is an additional challenge for the EeDaPP initiative to take on
231 Market needs Provide the missing link from origination to funding
Increasingly bond investors are assessing the alignment of their bond portfolio with climate goals
Over the next couple of years and driven by governmental schemes supervisors and investor
coalitions this approach is likely to become common practice and create more appetite for ESG
(Environmental Social and Governance) integration and impact reporting Having started considering
ESG factors earlier than elsewhere in Europe French Dutch and Nordic investors are comparatively
more advanced In France the integration process has been spurred by investor reporting obligations
under Article 173 of Francersquos law on energy transition for green growth In Sweden and in the
Netherlands normative-based approaches have been the precursor of more mainstream ESG
investing and engagement practices are more established In parallel a large coalition of investors
Climate Action 100+ is planning to engage with a list of 150 investee companies to request climate
target setting They primarily plan to leverage their voting rights as shareholders but most of these
investors are also investing in the bonds issued by the same companies15 This dynamic involves the
development of potentially convergent practices that might create opportunities for synergies
between target setting requests for bond issuers and impact reporting This implies two challenges
The first challenge is to provide the necessary information for a standardised ldquorobustness checkrdquo and
facilitate certification from third-party specialised institutions and investors To do that one can use
a ldquobest in classrdquo indicator using a performance distribution method (an example being from the
Climate Bond Initiative using a 15 ldquobest in classrdquo indicator) This requires specific information about
the relevant market to provide a comparative baseline (overall performance of the building stock at a
relevant perimeter)
The second challenge is to create a bridge between energy consumption data at the origination level
and the metrics used by ldquogreen bondrdquo certification bodies ie COsup2 emission reduction targets in
adequacy with macro level sustainable targets such as the Green Bond Principles National Sustainable
Strategies within the COP21 pledges etc The methodology to convert energy consumption into carbon
dioxide emissions is detailed in the IPCC Assessment Reportrsquos methodological annex16 This will require
15 https2degrees-investingorgwp-contentuploads201805Green-bonds-contribution-2Dii-May2018pdf 16 ldquoCarbon dioxide emission factors for electricity and heat have been derived as the ratio of CO2 emissions from fuel inputs of power plants relative to the electricity and heat delivered The method is equivalent to the one described above for primary factors The fuel inputs have in addition been multiplied by their CO2 emission factors of each fuel type as defined in IPCC (2006) The calculation of electricity and heat related CO2 emission factors are conducted at the country level Indirect carbon emissions related to electricity and heat consumption are then derived by simply multiplying the amount of electricity and heat consumed with the derived electricity and heat CO2 emission factors at the sectoral levelrdquo Assessment Report 5 annex ii page 1296 httpswwwipccchpdfassessment-reportar5wg3ipcc_wg3_ar5_annex-iipdf
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
1849
additional information on more macroeconomic variables such as type of heating energy mix and
conversion metrics
232 Impact reporting
Market practices
There have been many market initiatives both from within and beyond the EU for ldquogreen bondrdquo
issuance backed by energy efficiency and performance financing in the building sector Most of the
current green bond market is unsecured and therefore regarded as on-balance sheet transactions
where reporting requirements are substantially lower compared to public covered
bondsecuritisation Several banks in Europe have issued ldquogreenrdquo covered bonds such as Deutsche
Hypo Berlin Hyp Muumlnchener Hyp Casa Rural de Navarra and SpareBank1 Boligkreditt The latter two
have issued covered bonds backed by residential ldquogreenrdquo properties17 All issuing banks developed
impact reporting templates post-issuance certification and assurance reports that contains specific
information on the energy performance and efficiency of their portfolio on a aggregated level (see
Table 4)
Table 4 Impact reporting template ndash example from ABN AMRO (the Netherlands)
Residential
1 Percentage of buildings with primary energy consumption below 70 kWhmsup2
2 Percentage of buildings that comply to Dutch Building Code 2012 (Bouwbesluit and NEN 7120)
3 Energy Performance Coefficient levels
4 Average Energy consumption of the buildings financed through the loans average energy consumption in the Netherlands
5 Average CO2 emissions of residential buildings (in gmsup2) financed through the loans compared to the average CO2 emissions of residential buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
Commercial
1 Percentage of residential buildings that comply with the Dutch Building Decree 2012 (Bouwbesluit 2012 Chapter 5 and NEN 7120)
2 Distribution of Energy Performance Coefficient levels and Energy Performance Certifications (ldquoEnergy labelsrdquo) among the buildings
3 Percentage of offices that are located within a maximum of 1 km from two or more modalities of public transport (newly constructed buildings)
4 Average annual energy consumption of residential buildings offices retail stores andor logistics centres compared to average energy consumption per residential building office space or retail store in the Netherlands (in kWhmsup2)
5 Average CO2 emissions of residential buildings offices retail stores andor logistics centres (in gmsup2) financed through the loans compared to the average CO2 emissions of equivalent buildings in the Netherlands (based on the carbon intensity of the Dutch energy mix)
17 Read more in the previous EeDaPP publication on market mapping
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
1949
6 Percentage of building projects with gross floor areas bigger than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo completion certificate (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
7 Percentage of building projects with gross floor areas smaller than 5000 msup2 which have at least a BREEAM ldquoVery Goodrdquo or LEED ldquoGoldrdquo indicative label (newly constructed buildings) or GPR Building score of ldquo75rdquo or RVO Green funds sustainable buildings funding scheme 2010
Residential and
commercial real estate upgrades
1 Percentage of expected and if available realised CO2 emission reduction related to the upgraderenovation of commercial andor residential real estate
2
Distribution of Energy Performance Certificate issued by RVO (Netherlands Enterprise Agency Rijksdienst voor Ondernemend Nederland) before and after the energy efficiency upgrade except in case of transformation projects For the latter only the final Energy Performance Certificate will be reported
Second Party Opinions and External reviewers Over 98 of green bond issuance in Europe benefits
from at least one external review and 93 of these reviews include a second-party opinion (SPO)
Vigeo-Eiris has the highest market share with 38 by issuance volume (followed by Cicero with 29
Sustainalytics ISS-Oekom DNV GL18) The credit rating agencies Moodyrsquos and SampP Global Ratings have
provided green bond assessmentsevaluations on deals totalling over EUR 5 bn Some deals benefit
from both ratings and reviews Although some of these organisationsrsquo broader activities are regulated
third-party verifiers of green bonds do not have to abide by any particular rules in the environmental
finance market
Energy performance indicators from kWh to CO2 emissions savings
Sustainability scores based on ldquoCO2 emission avoidancesrdquo must integrate an Emissions Intensity
Factor this is the factor used to convert emissions performance into a level of emissions intensity
This is more relevant for non-residential buildings than for residential buildings For non-residential
buildings the factor to calculate emissions intensity is either floor area (in square metres) or number
of rooms whichever is relevant for the particular building type (eg offices hotels) For residential
buildings the lower variation within one building type (eg three-bedroomed dwellings) means that
emissions performance can be expressed for the whole building removing the need to calculate
emissions intensity19 Furthermore the data used to establish the emissions performance of the
energy-efficient buildings must satisfy quality and coverage requirements such as minimum sample
size relevant scope for carbon emission calculation operational performance preferred to modelled
performance and be expressed on an annual basis in kgCO2 terms
18 Find a list of approved Verifiers under the Climate Bond Standards here httpswwwclimatebondsnetstandardsassuranceapproved-verifiers 19 CBI provides a CO2 target calculator for low carbon buildings comprised in the pool of assets for residential and commercial buildings and property upgrades httpswwwclimatebondsnetstandardbuildingsresidentialcalculatorillustration
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
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3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
2049
233 Alignment with existing taxonomy international pledges and regulatory
developments
Existing ldquoGreen Taxonomyrdquo
Climate Bond Initiative (CBI) ndash Taxonomy for Buildings and ldquobest in classrdquo indicator to align the
building sector with a low carbon objective the CBI developed its Low Carbon Building Criteria (LCB)
establishing the green credentials of low carbon features of bonds loans and mortgages in the sector
and alignment with emissions standards and objectives The CBI states that for ldquogreen bondsrdquo backed
by energy efficient non-residential buildings the energy efficiency performance requirement is an
emissions targets derived from an ldquoemissions performance trajectoryrdquo that starts with the emissions
performance of the top 15 most energy-efficient buildings (of its type eg offices) in its geographic
location and declines to zero carbon emissions in 2050 For residential buildings the energy efficiency
performance requirement is a CBI-approved proxy derived either through benchmarking against the
local market emissions performance (ie emissions performance trajectory) or through analysis of a
particular ratinglabel as a proportion of total ratingslabels awarded under a scheme
Table 5 CBI Location Specific Criteria for Residential Buildings on European Markets
Country State StateSub Category
Proxy Brochure
Belgium Country
wide single amp
multifamily
Energy Performance Certificate (EPC) rating of A OR
Flemish building code after 2014
England Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
Germany Country
wide single amp
multifamily Energieausweis (EPC) rating of A OR B PDF
Netherlands Country
wide single amp
multifamily
Post 2012 Dutch Building Decree 2012
amp
Netherland Normalisation Institute (NEN) 7120 Standard
----------
Pre-2012 Energy Performance Certificate (EPC) Rating A
Norway Country
wide single amp
multifamily House or Apartment Energimerking (EPC) rating
of A B OR C
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
2149
House TEK (Building Code) 2007
Apartment TEK (Building Code) 2010
-----------
8 improvement from Energy Star Certified Homes Version 31 Revision 08
OR
9 improvement from Energy Star Certified Homes Version 31 Revision 09
Wales Country
wide single amp
multifamily Environmental Impact (EI) rating of A OR B as part of the Energy Performance Certificate programme
International International
LEED Gold OR Platinum
WITH
ASHREA 901
International International EDGE certified
International International Net Zero and Near Zero Energy Buildings (NZEB)
International International Living Building Challenge Certified
International International PassiveHaus Standard
European Commission Action Plan on Sustainable Finance (Taxonomy Benchmark Disclosures)
The European Commissionrsquos (EC) Action Plan on Sustainable Finance The European Commissionrsquos
Action Plan on Sustainable Finance is part of the Capital Markets Union (CMU) initiativersquos efforts to
connect finance with the specific needs of the European economy to the benefit of the planet and
society As such it is also one of the key steps towards implementing the COP21 Paris
Agreement 20 and the European Unions agenda for sustainable development 21 Based on the
recommendations set out by the High-Level Expert Group on Sustainable Finance (HLEG)22 in March
2018 the European Commission published a roadmap to boost the role of finance in achieving a well-
performing economy that also delivers on environmental and social goals
In May 2018 the EC presented a package of measures as a follow-up to its Action Plan23 The package
includes three proposals aimed at
20 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en 21httpseceuropaeueuropeaidpolicieseuropean-development-policy2030-agenda-sustainable-development_en 22 httpseceuropaeuinfopublications180131-sustainable-finance-report_en 23 httpseceuropaeuinfopublications180524-proposal-sustainable-finance_en
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
2249
bull Establishing a unified EU classification system of sustainable economic activities (taxonomy)
bull Improving disclosure requirements on how institutional investors integrate environmental
social and governance (ESG) factors in their risk processes
bull Creating a new category of benchmarks which will help investors compare the carbon
footprint of their investments
Taxonomy The Regulation sets out six environmental objectives
1 Climate change mitigation
2 Climate change adaptation
3 Sustainable use and protection of water and marine resources
4 Transition to a circular economy waste prevention and recycling
5 Pollution prevention and control
6 Protection of healthy ecosystems
For an activity to be environmentally-sustainable it must contribute substantially to one or more of
these objectives not significantly harm any of them and comply with minimum safeguards and
technical screening criteria which will be set out in a Delegated Act
Carbon Benchmarks The EC proposes to amend Benchmarks Regulation to include references to
ldquoLow-carbon benchmarksrdquo (ie one which has less carbon emissions compared to a standard capital-
weighted benchmark) and ldquopositive carbon impact benchmarksrdquo (those for which the underlying
assets are selected on the basis that their carbon emissions savings exceed the assetsrsquo carbon
footprints) Again this Regulation will be underpinned by Delegated Acts
Disclosures on sustainability risks and on sustainable investments The Taxonomy Regulation is
accompanied by four further Regulations one of which covers disclosures by the financial market
participants The articles largely refer to financial products which may be difficult to implement in the
context of portfolio management (a service) The disclosures cover the integration of sustainability
risks including how the firmrsquos remuneration policy aligns with the sustainable investment target of
products and cover both pre-contractual and periodic disclosures
Sustainable investments include those with an environmental (as defined by the taxonomy mentioned
above) social or good governance objective The three-line definition of social objective is not the
same as and does not refer to the definition used in the EuSEF Regulation This Disclosure Regulation
is to be underpinned by various Delegated Acts and Regulatory Technical Standards The legislative
proposal includes a definition of sustainable investments and sustainability risks to ensure a coherent
application of this Regulation which is clearly and consistently applied by financial market participants
it is necessary to lay down a harmonised definition of ldquosustainable investmentsrdquo and sustainability
risks
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
2349
Other relevant bodies
Principles for Responsible Investments24 The Principles were launched in April 2006 at the New York
Stock Exchange developed after a call from the United Nations UN- PRI is a 20-person investor group
drawn from institutions in 12 countries was supported by a 70-person group of experts from the
investment industry intergovernmental organisations and civil society Since then the number of
signatories has grown from 100 to over 1800 The six Principles for Responsible Investment are a
voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice The Principles were developed by investors for
investors In implementing them signatories contribute to developing a more sustainable global
financial system
United Nations Conferences of Parties (COP) The international agreements reached during the UN
various COPs are clearly defined nationally and regionally in the Sustainable Development Goals
(SDGs) 25 All the countries of the world have agreed on a sustainability agenda covering three broad
areas ndash economic social and environmental development ndash and comprising 17 global goals further
developed into 169 specific targets to be reached by 2030
G20 and FSB Task Force on Climate-Related Disclosures in 2015 G20 Finance Ministers and Central
Bank Governors asked the Financial Stability Board (FSB) to review how the financial sector can take
account of climate-related issues The FSB established the Task Force on Climate-Related Financial
Disclosures (TCFD)26 to develop recommendations for more effective climate-related disclosures that
could promote more informed investment credit and insurance underwriting decisions and in turn
would enable stakeholders to understand better the concentrations of carbon-related assets in the
financial sector and the financial systems exposures to climate-related risks
ICMA Green Bond Principles 27 Green Bonds enable capital-raising and investment for new and
existing projects with environmental benefits The Green Bond Principles (GBP) updated as of June
2018 are voluntary process guidelines that recommend transparency and disclosure and promote
integrity in the development of the Green Bond market by clarifying the approach for issuance of a
Green Bond The GBP are intended for broad use by the market they provide issuers with guidance
on the key components involved in launching a credible Green Bond they aid investors by ensuring
availability of information necessary to evaluate the environmental impact of their Green Bond
investments and they assist underwriters by moving the market towards standard disclosures which
will facilitate transactions
24 httpswwwunpriorg 25 httpswwwunpriorgsdgsthe-sdg-investment-case303article 26 Comprised 31 international members including providers of capital insurers large non-financial companies accounting and consulting firms and credit rating agencies 27 httpswwwicmagrouporggreen-social-and-sustainability-bondsgreen-bond-principles-gbp
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
2449
The Green Loan Principles launched on 21 March 2018 by the Europe-based Loan Market Association
(LMA) and Asia Pacific Loan Market Association (APLMA) the initiative aims to facilitate a more
targeted green financing approach across sectors This in turn could support further green bond
issuance from banks
The Central Banks and Supervisors Network for Greening the Financial System (NGFS)28 Launched
in December 2017 at the Paris Climate week NGFS is a group of Central Banks and Supervisors willing
on a voluntary basis to exchange experiences share best practices contribute to the development of
environment and climate risk management in the financial sector and to mobilize mainstream finance
to support the transition toward a sustainable economy Its purpose is to define and promote best
practices to be implemented within and outside of the Membership of the NGFS and to conduct or
commission analytical work on green finance The NGFSrsquos research agenda will deal with supervisory
issues at micro and macro level and an investigation on the role of central banks to scale up green
finance More particularly the first work stream is considering the extent to which a financial risk
differential exists between lsquogreenrsquo and lsquobrownrsquo assets taking stock of research projects from
university and experts to assess whether greenbrown loansbonds have lowerhigher default
probabilities than non-greenbrown loans bonds as a basis for exploring motives underpinning a risk
differential between such investment that are consistent with financial mandate This work is
expected to feed into the first NGFS progress report to be issued by April 2019
28ttpswwwbanque-francefrenfinancial-stabilityinternational-rolenetwork-greening-financial-systemabout-us
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
2549
3 ASSESS MARKET GAPS
This section of the report seeks to list identified market gaps bottlenecks and in some cases potential
solutions for the practical implementation of an EEM reporting protocol and common data portal
These gaps relate first and foremost to data availability quality harmonisation at EU level and
technical issues such as privacy non-bank nature and dynamic data monitoring
31 Data Availability
311 Overall assessment
In the table of Annex 53 there is an assessment made by the EeDaPP data services and repositories
of data availability source quality and format for all the possible variables that can feed the data
portal
312 Energy performance data availability
Following the Energy Efficiency and the Energy Performance of Buildings Directives the deliverance
of EPCs is mandatory for every property that is either rented or sold in all EU Member States that
implemented the measure into national legislation between 2009 and 2013
Despite being recognised as the most reliable tool for European assessment of the energy
performance of the building stock there remain major gaps with regards to the availability of the
information on EPC on several levels coverage scope and accessibility as shown in Figure 4 Of the
total building stock only a small share of energy efficient buildings has EPC labels (because for
example EPC was not available in a digital format or not used as certification for all energy upgrades
which is often the case for small renovations financed by own funds or short-term consumer loans)
From that share of the building stock that have EPC data available the access to the EPC database is
not publicly accessible in every EU Member State
Figure 4 Venn diagram of the building energy performance data availability
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
2649
EPC database register and access
In several EU Member States and EEA members like Norway access to EPC registers is public and free
of charge provided privacy protection measures are met In some countries EPC registers are
accessible via an online platform In other countries to date EPC registers do not exist or access to
them is restricted to some organisations such as in Germany (no public access) France or Spain
Total Building Stock
Energy Performant
Building stock
EPC labelled Building stock
EPC labelled
and accessible building
stock
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
2749
Figure 5 Mapping of the access to EPC databases
Some EPC registers are accessible via an online platform but EPC digital registration is not in place in
every country Countries in Scandinavia (Norway Denmark Sweden) the Netherlands the United
Kingdom France Portugal Greece and Estonia have automatic registration of EPC data Table 7
presents a list of the different EPC registers in EU (source Building Energy Performance EU
Observatory)
Table 6 National EPC Registers
Country Responsible organisation
Link
Denmark Energy performance certificates scheme database
httpsboligejerdk
France ADEME - Observatoire DPE
httpwwwobservatoire-dpefrindexphp
Italy Regional EPC registers
CTI-Comitato termotecnico italiano httpswwwcti2000it
Lithuania SPSC database httpswwwspscltcmsindexphpoption=com_contentampview=articleampid=57ampItemid=331amplang=en
Netherlands AgentschapNL
Norway EnergiMerking httpwwwenergimerkingnonoEnergimerking-Bygg
Portugal Portuguese Energy Agency (ADENE) SCE -
httpswwwsceptpesquisa-certificados
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
2849
energy certification system
Romania EPC Database
Slovakia INFOREG
United Kingdom
DCLC httpswwwgovukbuy-sell-your-homeenergy-performance-certificates
Hungary EPITES httpswwwe-epiteshuentan Ireland SEAI httpsndberseaiie Spain Regional EPC
register
Source BPIE
EPC data coverage
Given the short history of mandatory implementation of EPCs in the residential market the overall
coverage of EPCs with respect to the national housing stock is still limited This is reinforced by the
fact that EPC deliverance obligations do not apply to the stock that has not been rented or sold during
the last decade To date the Netherlands the United Kingdom and the Scandinavian countries display
the highest EPC coverage with respectively 32 (UK and Netherlands in 2013) 17 (Norway) 13
(Denmark) 11 (Sweden)
Table 7 Total stock of residential buildings registered in EPC database
Unit Source 2010 2011 2012 2013 2014
Netherlands calculation 236 289 307 321 na
UK calculation 64 119 172 246 325
Norway calculation 22 58 99 138 173
Denmark calculation 67 89 106 127 130
Sweden calculation 59 73 84 97 108
Italy calculation 16 34 55 76 95
Portugal calculation 28 47 61 73 na
France calculation na na na 44 44
Spain calculation na na na 33 40
Slovakia calculation 04 08 13 18 24
Lithuania calculation 01 02 04 13 22
Romania calculation 00 02 04 04 na
Germany calculation na na na na 077
Source Enerdata- 29
29 httpwwwzebra-monitoringenerdataeuoverall-building-activitiesshare-of-new-dwellings-in-residential-stockhtml-of-total-residential-stock-with-epchtml
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
2949
313 Link between energy performance property valuation and mortgage data
Property valuation is a pillar of the EEM framework and key indicators for its assessment must figure
in the common data portal to correctly measure the effect of energy efficient homes on property value
and derived indicators such as the Loan to Value Valuation reports or assessments must take into
account all factors considered salient to the value of the relevant property analyse other market
transactions from within the locality and arrive at a judgement of market value or mortgage lending
value which is then used by the lending institution at mortgage origination and for prudential
compliance purposes (ie in determining the Loan to Value ratio and the Loss Given Default amount)
At present there is no specific mandatory professional reporting requirement in relation to energy
efficiency except if it is deemed to be a ldquomaterial riskrdquo to the likely maintenance of the income In
other words due to the conservative role of property valuers there is a negative bias on the energy
performance factors taken into account in the property valuation report
In terms of professional body requirements placed on the valuer there are two leading professional
bodies in Europe the first is RICS (Royal Institution of Chartered Surveyors) the second is TEGoVA
the European Group of Valuers Associations30 RICSrsquo best practice advice to valuers the so-called ldquoRed
Bookrdquo sets out the main items that should be inspected and the due diligence process that valuers
should follow Under this valuers are ldquostrongly advisedrdquo to
ldquohellipcollect and record appropriate and sufficient sustainability data as and when it becomes
available for future comparability even if it does not currently impact on value This could be
particularly beneficial where the valuer is retained to provide regular reports to a clientrdquo
The intention behind this advice is that as more data becomes available and is stored within
databases of comparable evidence data on matters affecting sustainability and notably energy
efficiency will be routinely collected by valuers during their due diligence process Therefore this data
become available for use within the analysis phase of the valuation
30 httpswwwtegovaorgdatabina5738793c0c61b_EVS_2016pdf
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
3049
32 Data Consolidation Comparability and Harmonisation Issues
321 Data consolidation and common key identifier
As shown in Figure 6 the challenge of a common data portal for Energy Efficient Mortgages is to
reunite data fields and loan level information on several key yet different areas such as loan
performance valuation assessment energy performance and efficiency features and impact
reporting requirements Each database can be elaborated and operated by a different actor using
different key identifiers referring either to the borrower (individual and loan ID) the property
(cadastral of geographical data) or the issuerportfolio or cover pool level on the funding side for
impact reporting A common key identifier to connect all data source is needed
322 Harmonisation of the different methodologies and definitions
The EeDaPP protocol and final data portal must ensure that every variable reported is controlled for its potentially different nature format scope and calculation method Harmonisation needs to be undertaken for each type of criteria relative to energy performance valuation and financial performance
Definitions
In defining what is an energy performant building and setting the eligibility criteria for complying to
the EEM perimeter the choice was made to rely on European level tools and indicators enforced by
European legislation Energy Performance Certificates (EPCs) for existing rented or sold properties and
Loan Database
Valuation Database
Energy Performance Database
Impact Reporting Template
Energy Efficient Mortgages Common
Data Portal
Figure 6 Schematic view of the different sources within the EEM Database
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
3149
nZEB certifications for new builds Both concepts have criteria enforced by the Energy Efficiency
Directive (EED) and the Energy Performance in Buildings Directive (EPBD) The challenge here is that
the directives only define the concepts of the aforementioned indicators and give considerable
latitude to Member States to refine them Therefore the nZEB and EPC scopes definitions and
methodologies can differ across the EU
Nearly Zero Energy Building (nZEB) According to the EPBD [a nearly zero energy building is a]
ldquohellipbuilding that has a very high energy performancehellip The nearly zero or very low amount of energy
required should to a very significant extent be covered by energy from renewable sources including
renewable energy produced on-site or nearbyrdquo As mentioned above the nZEB concept is very flexible
with no single harmonised nZEB definition across the EU The EPBD neither prescribes a common
approach to implement nearly Zero-Energy Buildings nor describes the assessment categories in
detail Thus Member States and in some cases regions within them have established different
parameters both in terms of quantity and quality in their nZEB definitions
To date out of the 29 countries (EU28 and Norway) 16 jurisdictions have adopted nZEB definitions
for new buildings and 12 are developing definitions In most countries the nZEB definitions refer to
maximum primary energy as one of the main indicators In a few cases (eg the Netherlands and the
Belgian Region of Flanders) the primary energy use of the building is assessed through a non-
dimensional coefficient comparing the buildingsrsquo primary energy use with a ldquoreferencerdquo building with
similar characteristics (eg building geometry) In several countries (eg the United Kingdom Norway
and Spain) carbon emissions are used as the main indicator while in others (eg in Austria and
Romania) carbon emissions are used as a complementary indicator to primary energy use For
residential buildings most jurisdictions aim to have a primary energy use not higher than 50
kWhmsup2year To control for different property types and climate different requirements are
established for single family houses as well as apartment buildings and higher values are established
for regions with a colder climate (eg in France and Romania)
Format and structure
First data needs to be available in an electronic format and stored in a database which can be easily
accessed Today a significant amount of data is already available but only in paperpdf format As
such it can be problematic to accessanalyse and entails digitalisation difficulties because some key
data points can be stored in different formats (eg EPCs have four values - a letter and a number in
kWhmsup2 per year for energy consumption and a letter and a number in kg CO₂msup2 per year for carbon
emissions) Indeed EPCs enforced by the EPBD can take several forms depending on whether it is
expressed as a label a final energy consumption quantitative estimation a carbon emission estimate
or a scoreindex that measures the buildingrsquos overall primary energy performance as a ratio to a
reference value) The lower the scoreindex the more energy-efficient the building is
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
3249
323 Calculation methods and comparability issues
Definitions of data points can be different even within one country (ie at regional level like in
Belgium Italy or Spain) making analyses and comparisons difficult as shown in Table 9
EPC calculation methods
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
Table 8 EPC Conversion table EPC class
France Austria Sweden Germany Portugal Belgium Czech Rep
Romania Norway UK Netherlands Denmark
Label A lt50 lt80 lt 50 lt50 le25 45 lt43 lt 150 9033 32 A++ (EI lt= 05) lt 20
Label B 51-90 81-120 100 51-100 26-50 95 43-82 150 - 259 12567 33-65 A+ (EI 051 lt 07) lt 300 + 1000 A
Label C 91-150 121-160 150 101-150 51-75 150 83-120 259 - 389 16167 66-100 A (EI 071 lt 105) lt 525 + 1650 A
Label D 151-230 161-280 200 151-250 76-100 210 121-162 389 - 557 20233 101-135 B (EI 106 lt 13) lt 700 + 2200 A
Label E 231-330 281-340 300 251-350 101-150 275 163-205 557 - 785 24367 163-170 C (EI 131 lt 16) lt 110 + 3200 A
Label F 331-450 341-400 400 351-400 151-200 345 206-245 785 - 1150 30333 171-200 D (EI 161 lt 2) lt 150 + 4200 A
Label G gt451 gt400 gt400 gt401 201-250 gt345 gt245 gt1150 lt303 gt200 E (EI 201 lt 24) lt 190 + 5200 A
Figure 7 EPC energy consumption levels according to EU selected countries
Sources BPIE ZEBRA 2020
32 25 43 45 5080
50 5090
65 5082 95 90
120100 100
12567100
75120
150 150 160 150 150 16167135
100
162210
230
280
200
25020233
170150
205
275
330 340300
350
24367200 200
245
345
450
400 400 400
30333
UK Portugal Czech Rep Belgium France Austria Sweden Germany Norway
Bu
ildin
gs
ener
gy c
on
sum
pti
on
(k
Wh
msup2
year
Label A Label B Label C Label D Label E Label F
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
3449
Valuation assessment
As mentioned above property valuation is a pillar of the EEM framework and key indicators for its
assessment must figure in the common data portal to correctly measure the effect of energy efficient
homes on property value and derived indicators such as the Loan to Value There are two main
valuation methods used in line with current EU regulations (Capital Requirements Regulation and the
Mortgage Credit Directive) The Mortgage Lending Value and the Market Value methods The EeDaPP
data portal as a first objective and as previously developed needs to gather as many data fields and
information available as possible In a second step there is a need for harmonisation of definitions
calculation methods and coverage of property valuation assessments across European countries and
the EeDaPP initiative will need to process country-level valuation estimations and assessments
Automated Valuation Models (AVMs) are statistical valuation solutions that provide an estimate of
value of specified properties using modelling techniques based on a comparison approach The use of
AVMs has increased considerably in Europe over recent years and their features (coverage
automation and digital format) can play an important role in the development of Energy Efficient
Mortgages in terms of their reporting and the establishment of a data portal especially for portfolio
analysis In the EeDaPP context AVMrsquos must integrate relevant characteristics regarding energy
performance such as the EeMAP valuation Energy Efficiency Checklist31 In doing so they can be a
potential solution to provide granular property valuation assessments with a direct link to energy
performance features The support and the implication of European level actors such as the European
AVM alliance can play a key role here
The following table details the practices and calculation methods used for property valuation and the
use of AVMs for selected EU countries
Table 9 Selected EU Countries Property Valuation Standards and Calculation Methods
Valuation Method Valuation Assessment Use of AVMs
Belgium Market Value based on notarial information and internal minimum standards
Internal independent review by the lender (valuation report asked for property gteuro2 bn)
Yes
Denmark Market Value (defined by the Danish Valuation Order)
Internal amp external comparison method for residential properties and Investment Value for Commercial properties
Yes for portfolio analysis and upon the approval of the Danish FSA for origination
Germany Mortgage Lending value and Market Value as both laid
Methodology provided by the Real-Estate Valuation Guidelines
Yes for Portfolio analysis and from BaFin best practices may be used at
31 Available here httpeemapenergyefficientmortgageseuwp-contentuploads201811Valuation-and-Energy-Efficiency-Checklistpdf
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
3549
down by the Pfandbrief Act
origination if they comply with all requirements for valuation reports
Italy Market Value Guidelines laid down by Italian Banking Association (ABI)
Not permitted for individual valuations
Spain Mortgage Lending Value as basis Market Value and Replacement Value
List a ldquoreliable standardsrdquo set out in national legislation (Norma ECO 8052003)
Not allowed at origination allowed for portfolio analysis and asset quality review for specific cases
United Kingdom
Market Value (with special assumptions for commercial properties)
Rules and guidelines laid down by external professional association (RICS) Valuation report upon onsite inspections
Quality control tool at origination and portfolio monitoring
Source EMF-ECBC Study on the Valuation of Property for Lending Purposes (2017) 32
33 Data minimum quality and representativeness
At the time of writing the EeDaPP Consortium is experiencing difficulties in finding tangible and robust
statistical evidence for two reasons The first is that the implementation of Energy Efficient Mortgages
is too recent and insufficiently harmonised to offer a strong set of exploitable data Hence the main
determinants of such events are difficult to model and lack robustness The second is that for the past
few years the existing conventional mortgages in Europe exhibit very low default rates
331 Sampling problem coverage and data history
Data on EPCs covers on average less than 10 of the building stock As shown in Figure 8 from 2014
data there is a lack of observations at each tail of the EPC distribution and some heterogeneity given
the country Registered EPCs in Europe in 2014 do not show any ldquoGrdquo labels and very few ldquoArdquo labels
although there is an upward trend to that latter issue ldquoArdquo and ldquoBrdquo labels account for less than 20 in
all selected countries but Slovakia and Romania (where EPC coverage doesnrsquot pass 2 of the total
building stock)
32 Available here httpshypoorgappuploadssites3201709EMF-ECBC-Study-2017-FINALpdf
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
3649
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014
Sources Zebra
332 Lack of default data for the relevant period
The period for which we wish to investigate the impact of energy efficiency features in housing on the
probability of default of the borrower is peculiar from a macroeconomic cycle point of view Indeed
energy efficiency and performance labels in Europe appeared mostly after 2009 in a post-global and
banking crisis era in the EU Hence for the period 2010-2018 relatively speaking very few occurrences
of default in the residential housing market were witnessed in Europe
34 Data processing monitoring and usage
341 Privacy and contractual considerations
The main EU law measures applicable to the collection of energy data are the General Data Protection
Regulation (GDPR) and the (future) recast of the Electricity Directive
GDPR analysis
The objective of EEM banks and their partners is to handle individual loan-level data with the aim of
monitoring the correlation between energy efficiency and other risk metrics such as probability of
default and arrears This activity falls within the scope of ldquodata processingrdquo under the GDPR Metering
and consumption data are included in the definition of ldquopersonal datardquo in the GDPR because they are
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
3749
inextricably linked to a natural person via a unique identifier Therefore all activities under the EEM
umbrella need to be GDPR-compliant
The first step towards GDPR compliance is identifying the data controller(s) processors and
recipients The responsibility of correct data management will lie with the organisation(s) identified
as the controller while processors and recipients will act on behalf of the controller and will have to
be disclosed to the subject The controller determines the purposes and means of the data
processing In the case of EEMs the purpose is informing the bankrsquos risk management processes with
a view to granting (favourable) credit and therefore the bank shall be the controller
Secondly it will be necessary to identify the most appropriate legal basis Three different GDPR legal
bases may apply for the purpose of EEMs consent contractual performance and legitimate interest
Consent would likely be the most solid however it may prove difficult with ldquoprivacy-consciousrdquo
consumers especially in certain markets (eg Germany) However respecting the purpose-limitation
and minimisation principles origination of a EEM may be made conditional on giving consent to the
collection of energy performance data which would be considered as ldquonecessary to provide the
servicerdquo A consent form would have to be properly designed in accordance with the GDPR (ie be
intelligible and easily accessible in clear and plain language) and include consent to being subject to
prospective automated decisions Furthermore the data subject must be allowed to withdraw
consent and terminate processing This may prove challenging since ldquoterminating the servicerdquo would
mean the loan has to be paid in full when withdrawing consent Importantly even if contractual
performance were chosen as the legal basis the obligation to communicate to the subject all the
information relevant to the processing would still apply as part of the right to transparency
The data processing should be designed in accordance with the GDPR principles in particular purpose
limitation and data minimisation This means that data collected should be used only for the declared
purpose and only data necessary for that purpose should be collected Other relevant principles
include time limitation (data stored only for as long as it is needed) integrity and confidentiality
Finally the privacy by design principle would potentially imply a certain degree of ldquomodularityrdquo in the
collection of data but this is more an orientation principle than a requirement
The controller must also ensure that the data subject is granted the GDPR rights which include
Transparency all relevant information with regard to the processing must be communicated
including potential transfer of data
Access to hisher data and right to portability on request the controller must provide the
data in structured machine-readable format and allow the transmission to another controller
This could actually constitute an advantage in the context of the EeDaPP because it would
allow customers to request their energy suppliers to provide them (or banks directly) with
their data
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
3849
Right to have hisher data erased (ldquoright to be forgottenrdquo) this poses the problem that
ldquoterminating the servicerdquo upon withdrawal of consent is not simple in the case of a loan
It is worth noting that data processed for statistical purposes at an aggregate level would be excluded
from the scope of the GDPR therefore analysis aimed at proving the correlation between energy
efficiency and financial performance would be lawful even without consent if the information is not
attributable to a specific natural person
EEM related activities will unlikely match the criteria for the requirement to appoint a Data Protection
Officer and carry out a Data Protection Impact Assessment However such a measure would greatly
simplify compliance Banks may already have within their organisational structure a Data Protection
Officer therefore costs would not be impacted
Electricity directive
As part of the Clean Energy Package in 2016 the European Commission proposed a recast of the
Electricity Directive (Directive on common rules for the internal market in electricity) The Directive is
currently at the Trilogue phase within the European Institutions therefore the detailed final wording
is still not known Member States will have 12 months to transpose the provisions after the Directiversquos
adoption
The Directive foresees specific provisions (Art23) for the management of energy data In particular it
is stated that Member Statesrsquo authorities will have to list entities that can access and exchange energy
metering and consumption data (the European Parliament proposes to explicitly include data required
for automated energy efficiency programmes and energy management services) ldquowith explicit
consent and in accordance with GDPRrdquo Eligible parties shall include at least ldquocustomers suppliers
transmission and distribution system operators aggregators energy service companies and other
parties which provide energy or other services to customersrdquo Eligible parties should be provided with
the data on a non-discriminatory manner and no additional charges may be applied to the customer
for the collection of data
342 Practical Issues Dynamic monitoring
Regulatory revaluation requirements
In December 2016 the European Banking Authority (EBA) published a set of recommendations on
monitoring and revaluation requirements of LTV measurements for an up-coming EU framework for
covered bonds
bull Where cover asset eligibility is based on loan-to-market value limits the value of the property
securing a particular loanmdashand the corresponding regulatory LTV limit determining the
contribution of that loan to the coverage requirementmdashare monitored and updated (eg at
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
3949
least via an indexation or other statistical method) at least on a yearly basis for both residential
and commercial properties and more frequently where either the management of the
covered bond programme or the cover pool monitor or the competent authority deem
appropriate
bull Where cover asset eligibility is based on loan-to-mortgage lending value limits the general
level of market prices for the relevant real estate market is to be monitored and the basis of
valuation of property collateralising individual loans is to be reviewed (as a minimum) when a
general reduction in market prices suggests an impairment of the mortgage lending value or
if the affected loan becomes delinquent
bull Revaluation of the properties securing the loans should be based on transparent valuation
rules and be carried out by an agent who is independent from the credit granting process As
a minimum the valuation process should be compatible with either the conditions laid down
in the first or the second subparagraph of Article 229(1) of the CRR
bull When deciding upon the frequency of revaluation qualitative aspects such as robustness of
the revaluation process should also be taken into account
Energy savings dynamic monitoring
Ensuring the compliance of energy efficiency funding to a minimum performance threshold can imply
the monitoring of energy savings Those requirements can be met by the deliverance of an Energy
Performance Certificate after the renovations that shows the improvements in a buildings
performance and energy consumption compared to its precedent state It can also be done via the
monitoring of empirical energy consumption and expenditures data from households living in that
building Energy efficiency gains are monitored and verified with the dynamic monitoring and
assessment of quantitative data such as daily weekly monthly or even annually energy consumption
and expenditures The assessment measurement and monitoring of such data is not within the
competence or the core expertise of banks and such schemes suggest the implication of a third-party
partner such as the energy expert of Energy Services Companies (ESCOs) for example under the
Energy Savings Certificates (or ldquoWhite Certificatesrdquo) schemes Such funding scheme based on empirical
energy consumption measurements that for example make the use of smart meters and appliances
connected to the Internet of Things (IOT) to procure real time energy consumption and gains granular
data The challenge for the EeDaPP initiative is to make room for such innovative solutions and
integrate into the reporting protocol yet another possible information source data type and provider
(energy providers servicers distributershellip)
343 Evolving sustainability targets
The Sustainable Development Goals and national pledges regarding the fight against climate change
following the Paris Agreement on Climate are deemed to be re-evaluated to allow for a smooth
transition towards a post-carbon economy
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
4049
The European Commission sets out intermediate targets overall and within key sectors such as the
building sector The ldquoClean Energy for all Europeans Packagerdquo also called the ldquoWinter Packagerdquo
published in November 2016 sets the EU 2030 targets aimed at enabling the EU to deliver on its Paris
Agreement commitments 33 The ldquoWinter Packagerdquo includes an overall (cross-sectoral) energy
efficiency target for the EU for 2030 of 325 with an upwards revision clause by 2023 Against this
background ldquoEU measures therefore focus on sectors where the potential for savings is greatest such
as buildings The EU has set itself a 20 energy savings target by 2020 (when compared to the
projected use of energy in 2020)rdquo The ldquoWinter Packagerdquo triggers the revisions of both the Energy
Efficiency Directive and the Energy Performance of Buildings Directive The EPBD ldquoCreates a clear path
towards a low and zero-emission building stock in the EU by 2050 underpinned by national roadmaps
to decarbonise buildingsrdquo The intermediate target sets the objective that all new buildings starting in
2021 must be nZEBS (nearly-zero energy buildings)
As mentioned by exiting taxonomy and requirements for the issuance of long-term ldquogreen bondsrdquo
energy efficiency policy has to fulfil dynamic and long-term sustainable targets In its ldquoGreen Bondrdquo
certification methodology the Climate Bond Initiative uses a tool and methodology described in Figure
9 to select eligible assets in a green bond portfolio with a medium to long-term maturity
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector
Source Climate Bond Initiative
33 httpseceuropaeuclimapoliciesinternationalnegotiationsparis_en
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
4149
To boost a nascent market especially regarding portfolios backed with assets comprising existing
buildings with energy upgrades a grandfathering clause can be a solution to guarantee the eligibility
of assets while regulation updates are setting stricter criteria and targets valid for new issuances A
grandfathering clause is an exemption that allows persons or entities to continue with activities or
operations that were approved before the implementation of new rules regulations or laws Generally
speaking a grandfathering clause only exempts people or entities engaged in specified activities prior
to new rules being put in place while all other parties must abide by the new rules
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
4249
4 Conclusions and next steps
Notwithstanding substantial market heterogeneity the energy efficient market needs standards and
guidelines to provide European stakeholders the possibility to build a profitable business model with
minimised transaction and implementation costs These stakeholders need access to a pooled
harmonised and robust dataset to provide the statistical evidence of the lower risk profile of an EEM
product Furthermore the EeDaPP platform can serve as a reporting framework for the diversification
of institutional funding whilst offering a comprehensive data set towards research and policy analysis
The EeDaPP initiative aims to establish a reporting protocol and design and structure a common data
platform that is secured and relevant to the different stakeholders and fulfil its objectives to
1 Gather and collect data of different natures (energy financial loan-level aggregated) coming from
different sources (borrower bank energy provider valuer energy expert) and from different
jurisdictions (institutions and countries)
2 Provide a robust and reliable database for research and data analyses purposes that can deliver in
due course robust statistical evidence of the positive impact of energy performance and efficiency
on risk (via its main financial indicators Probability of Default Loan to Value and Loss Given
Default)
3 Provide reporting standards on funding in line with existing and forthcoming reporting initiatives
(Securitisation Regulation Covered Bond Directive COP21 etc)
The EeDaPP data framework reporting protocol will need to overcome several challenges
1 Data availability
2 Data collection and consolidation
3 Data harmonisation
4 Energy and financial performance assessment and monitoring
5 Disclosure levels and needs
The reporting framework must be built according to data sensitivity and specificity of the reporting
ldquolayersrdquo and sources (households banks valuers energy experts and public institutions) and pay close
attention to the different levels of complexity and granularity This is especially so given that the data
includes significant strategic elements that can lead to privacy issues such as bank risk profiles and
capital costs real consumer consumption data retrofit profitability and building performance
monitoring and insurance A fair share of this information is owned collected and monitored by non-
bank stakeholders the common data portal and reporting protocol will have to include inputs and
expertise from third-parties partners such as energy service companies public institutions (national
energy agencies) or real-estate data providers Where possible in the future the EeDaPP initiative
could make use of system modelling techniques such as AVMs and theoretical EPCs and related
technologies to infer preliminary AVMrsquos and Energy Performance assessments
Finally for funding purposes the protocol and requirements must be aligned with existing best
practices in terms of reporting asset eligibility criteria (impact) reporting and disclosures and include
the relevant stakeholders present in the market
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
5 Annexes
51 List of Figures and tables
LIST OF FIGURES
Figure 1 Stakeholders on the retail market origination side and on the capital markets funding side 6
Figure 2 Energy Label Atlas in the Netherlands ndash screenshot 13
Figure 3 Difference in mortgage arrears (high energy efficiency vs low energy efficiency) 15
Figure 4 Venn diagram of the building energy performance data availability 25
Figure 5 Mapping of the access to EPC databases 27
Figure 6 Schematic view of the different sources within the EEM Database 30
Figure 7 EPC energy consumption levels according to EU selected countries 33
Figure 8 Distribution of residential building stock registered in EPC database per label in 2014 36
Figure 9 CBI CO2 emission target calculator for Green Bond certification in the building sector 40
LIST OF TABLES
Table 1 Reporting ldquoLayersrdquo and information sources 8
Table 2 Existing Data Templates 9
Table 4 Annual energy costs (in GBP) by type and energy efficiency of the property 15
Table 5 Impact reporting template ndash example from ABN AMRO (the Netherlands) 18
Table 6 CBI Location Specific Criteria for Residential Buildings on European Markets 20
Table 7 National EPC Registers 27
Table 8 Total stock of residential buildings registered in EPC database 28
Table 9 EPC Conversion table 33
Table 10 Selected EU Countries Property Valuation Standards and Calculation Methods 34
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
4449
52 EPC coverage
Total Dwelling Stock thousands units
2000 2011 2012 2013 2014 2015 2016 2017
Austria 3833 4441 4463 4489 4507 4506 4542 4600
Belgium 4659 5131 5180 5229 5277 5319 5361 5412
Bulgaria na 3900 3909 3918 3928 3935 3944 3951
Croatia na 1924 na na na na na na
Cyprus 288 431 437 441 444 446 na na
Czech Republic na 4700 4729 4754 na na na na
Denmark 2568 2786 2797 2812 2827 2844 2861 2878
Estonia 621 656 658 na na na na na
Finland 2295 2556 2580 2600 2618 2634 2655 na
France 28988 32860 33212 33575 33917 34225 34537 34800
Germany 38384 40630 40806 40995 41221 41446 41703 41970
Greece 5455 6425 6462 6485 6499 6508 6514 6521
Hungary na 4349 4394 4402 4408 4415 4420 4427
Ireland 1406 1999 2003 2007 2014 2022 2004 1974
Italy 27422 31791 31576 na na na na na
Latvia 796 1019 na na na na na na
Lithuania 1309 1283 1289 1298 1396 1408 1417 7734
Luxembourg 118 223 na na na na na na
Malta na 224 na na na na na na
Netherlands 6651 7266 7386 7449 7535 7588 7641 7741
Poland 11845 13560 13723 13853 13983 14119 14272 na
Portugal 5007 5879 5898 5910 5920 5926 na na
Romania 7908 8722 8761 8800 8841 8882 8929 na
Slovakia na 2036 na na na na na na
Slovenia 712 850 854 857 860 na na na
Spain 20376 25209 25271 25245 25209 25171 25126 25094
Sweden 4273 4524 4551 4634 4669 4717 4796 4859
United Kingdom 25319 27614 27767 27914 28073 na na na
Australia na 7760 na na na na na Brazil 62117 63768 65130 67039 68037 69223 69773
Iceland 105 131 132 132 134 135 136 138
Japan na na na 60629 na na na na
Norway 1942 2369 2399 2427 2456 2485 2516 2548
South Korea 17739 18082 18414 18742 19161 19559 19877
Russia 55100 60800 61500 61300 62900 64000 64900 na
Turkey 15070 19482 na na na na na na
USA 116264 132168 132600 133199 133946 134764 135660 136570
Sources EMF-ECBC Hypostat 2018
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
53 Data Availability Overall Assessment
Category Variable Description Variable Format Possible Data
Source Availability to Data Servicer
EeDaPP Consortium Comments
Borrower Information
at origination
Age Quantitative Mortgage Servicer System
Good At origination (however current age can be calculated)
Borrower credit rating QuantitativeQualitative
(score) Credit Bureau
Bank Poor
Not registered in every jurisdiction In the Netherlands a check will be done on current outstanding debt at other financial institution in the Netherlands - called the BKR check Next to this there is no European definition FICO-like currently
Education Level Qualitative (discrete) Credit Bureau
Bank Poor Level of Education used as credit scoring assessment
Employment status Qualitative (discrete) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household income Quantitative (euro) Mortgage Servicer System
Medium At origination to best of our knowledge this not updated in most jurisdictions
Household size Quantitative Credit Bureau
Bank Poor In most cases only the primary and secondary (if applicable) borrower are known
Property Information
Property Current value Quantitative (euro) Bank IT-system Good Often indexation Mortgage Lending value or AVM
Fuel heating type Qualitative (discrete) Borrower Poor This variable is not commonly reported and asked at origination specific need of EEM (at ldquogreen bondrdquo certification for carbon emission calculations)
Historical value (monthly quarterly or yearly
frequency) Quantitative (euro) Bank IT-system Good Often indexation or AVM
Number of bedrooms Quantitative Credit Bureau
Bank Poor
Occupancy information Qualitative (discrete) Mortgage Servicer System
Medium Could be in Mortgage Servicer System question is if this will be updated at all
Original value at mortgage origination
Bank IT-system Good Standard in regular mortgage reporting and performance data
Property rentable area Quantitative (in msup2) Credit Bureau
Bank Poor
Requested for commercial property this variable is not commonly reported and asked at origination
Property type Qualitative (discrete) Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
4649
Property year built Quantitative (date) Mortgage Servicer System
Good
Total floor area (m2) Quantitative (in msup2) Credit Bureau
Bank Poor
The information is probably in most mortgage deeds however we doubt to which degree this is currently digitalised
Zip code location Quantitative (spatial) Mortgage Servicer System
Good Available however due to GDPR it is often anonymized truncated
Derived Information
at origination
DSCR (debt service coverage ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
DTI (debt-to-income ratio)
Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
House value relative to the area median value
Quantitative - ratio Derivable Medium Depends on available information per jurisdictions Could be calculated by use of land register cadastre AVMs regional statistics
LTV (loan-to-value) Quantitative - ratio Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Price per square meter Quantitative euromsup2 Valuation
assessment Medium
If the square meters per dwelling are available this could easily be calculated However statistics per area city tend to be available
Energy Performance Information
Energy Performance Certificate (EPC
periodicity amp frequency)
Various (quantitativediscretescore)
EPC register Medium Depends on Jurisdiction In the Netherlands the EPC data is public and free information accessible to anyone This is not the case for al jurisdictions
Building Labels Discrete Building
Certification Provider
Poor Label delivered at origination from certification entities (LEED BRREAM HQE etc)
Operational Energy Consumption
Quantitative Utility Provider Poor This information undoubtfully exists at utility providers There are however some legal GDPR and logistical hurdles to combine this information with regular mortgage reporting and performance data
Loan information
Actual rate (mortgage note rate adjusted by
points) Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
4749
at origination Amortisation period Quantitative
Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Days in delinquency Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Interest-only periods Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Margin and cap if an ARM Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Maturity date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Original balance Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Origination date Quantitative Mortgage Servicer System
Good Standard in regular mortgage reporting and performance data
Prepayment provisions Quantitative Mortgage Servicer System
Medium In some jurisdictions there are prepayment penalties These are captured in the mortgage deed or reps amp warranties They depend on the product type In general one should say that this information should be available to the servicer
Rate index for adjustable-rate mortgages (ARMs)
Quantitative Bank IT-system Medium If applicable this will be available in most cases
Location information (optional)
CoolingHeating degree-days
Quantitative Eurostat Good Standard in carbon savings assessment to control for the specific climate in selected countries
Distance to central business district
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System access depends on data granularity and privacy issues
Distance to closest public transportation hub
Spatial (in meters) Mortgage Servicer System
Calculation Derived information from address and city level geographic Information System
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
D32 Technical Report on Market Needs and Gaps
4849
Electricity price Quantitative (euro) Eurostat Good Energy Prices reported at macrolevel for specific users (households industrials) and given their level of annual electricity demand (small medium or big users)
Number of foreclosures Quantitative EBA NPL Template
Medium EBA discloses bank or country level information not loan by loan
Unemployment rate Quantitative Eurostat Good Macroeconomic indicator displayed at national or regional levels
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
This project has received funding from the European Unionrsquos Horizon 2020 research and innovation programme under grant agreement No 784979
EeDaPP ndash Energy efficiency Data Protocol and Portal - is an initiative by the European Mortgage
Federation - European Covered Bond Council (EMF-ECBC) Carsquo Foscari University of Venice CRIF
SpA European DataWarehouse GmbH Hypoport BV TXS GmbH and SAFE Goethe University
Frankfurt For more information visit wwwenergyefficientmortgageseu
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