energy efficient mortgages action plan (eemap) energy ... · for data collection at mortgage...
TRANSCRIPT
Energy efficient Mortgages Action Plan (EeMAP)&
Energy efficiency Data Protocol and Portal (EeDaPP)
Andrea BedinResearch Assistant at Research Center SAFE
Energy efficient Mortgages Action Plan (EeMAP)Motivation
EU: building stock is the largest single energy consumer in the EU
40% of total energy consumption, 36% of CO2 emissions
about 35% are over 50 years old, 75-90% predicted to remain standing in 2050
EU set energy savings targets for 2020 and 2030 and a long-term 2050 greenhouse gas reduction target
Potential: by improving the energy efficiency (EE) of buildings, the EU’s total energy consumption could be reduced by 5-6% and CO2 emissions by 5%
Current state: only a fraction of bank lending and funding is explicitly classified as green
Challenges: lack of standardization (in terms of reporting definitions and dynamic datasets) hinders transparency, viability and risk assessment and is thus a major obstacle to the development of the market
There is a huge potential to bridge financial innovation and the EE world and to unlock the benefits of mortgage financing to support EE
EeMAPGoal
The EeMAP Project intends to deliver a standardised framework to stimulate EE investment by households through private bank financing
A framework
for a building energy passport, recording the EE history of a property by recognising the improvements made
that can integrate the “green value” of a property through EE and collected market data (probability of default, loss given default)
for an EE mortgage product (green covered bonds)
4
𝑇𝑇0 𝑇𝑇1
EE Renovation
Energy efficiency advisor (EEA) to advise on:1. Necessary EE
renovation2. Complementary
funding sources (subsidies)
Mortgage application
Before EE Renovation
SME carries out EE renovation, guaranteeing performance
After EE Renovation
Bridging Renovation Gap - In Practice
Mortgage granted & EE top-up provided directly to SME
Ex ante Valuation of property
Qualified SME selected by bank to carry out EE renovation
Bank grants preferential interest rate on mortgage based on EE/smart meter
EEA certifies EE renovations in line with EE requirements
Ex post valuation of property
Underlying risk parameters impacted by EE
Renovation impacts positively on property valueensuring wealth conservation & loss mitigation bypreventing “brown discount”
EE leads to a reduction in the impact of energycosts to income, reducing borrowers‘ probabilityof default
Objective & Underlying Business Case
The ultimate objective is a pan-European private bank financingmechanism, based on a standardised approach, to encourage energyefficient improvement by households of the EU’s housing stock by way offinancial incentives linked to the mortgage, and in this way support the EUin meeting its energy savings targets.
Independent from, but complementary to, public funds or tax incentives
Underlying business case
Methodology - Financing mechanism
Key challenge: to incentivise energy efficient investment in existing dwellings, whichconstitute bulk of EU housing stock
Based on a set of EE indicators, lenders could offer: New Builds: Discount in interest rate for new builds with energy rating A+/A or B; Existing property: Discount in interest rate according to improvement in energy rating
of property between D and A/A+
Energy efficient Data Protocol and Portal (EeDaPP)
The EeDaPP Project intends to deliver large-scaletechnical and financial data related to energyefficient mortgages by way of a standardised dataprotocol to be accessed through a common,centralised portal. Three key outputs will be:
Definition of specific reporting criteria
Design of the standardised protocol for the
processing and disclosing of data
Design of a centralised portal
Goal: Analysis of the correlation between buildings’ energy efficiency and borrowers’ default probability
Motivation: The cornerstone of the project is the assumption that energy efficiency has a risk mitigation effect for banks as a result of the impact on a borrower’s ability to service his debt
Main challenge:
Data availability: lack of data that links energy efficiency information with loan’s performance and borrower’s characteristics
Inconsistent definition of EE across and within EU countries
No standardized framework for data collection at mortgage origination
Short sample history
Access to available data
UK: English housing survey
Belgium: Green mortgages originated between 2009 and 2011
Netherlands
Effect of EE on Mortgage Performance
European DataWarehouse: loan-level data without direct EE information Solution: use EE proxy Netherlands: provisional EE classification table issued by
Netherlands Enterprise Agency
Effect of EE on Mortgage Performance
Percentage of defaults increases with lower EE-rating
EE mortgages seem to survive for a longer time period
Effect of EE on Mortgage Performance
Logistic Regression
Effect of EE on Mortgage Performance
Thank you !