Energy efficient Mortgages Action Plan (EeMAP) Energy ...
Transcript of Energy efficient Mortgages Action Plan (EeMAP) Energy ...
Energy efficient Mortgages Action Plan (EeMAP)&
Energy efficiency Data Protocol and Portal (EeDaPP)
The Initiative
February 2019 Energy Efficient Mortgages Initiative 2
The Energy Efficient Mortgages Initiative is aimed at deliveringa standardised European framework and data collection processfor energy efficient mortgages, with favourable financingconditions for energy efficient buildings and energy savingrenovations.
It consists of two parallel projects, the “Energy efficientMortgages Action Plan” (EeMAP) and the “Energy efficiencyData Protocol and Portal” (EeDaPP), and is funded via theEuropean Commission’s Horizon 2020 Programme.
www.energyefficientmortgages.eu
More than
350 million
live under
their own
roof
247 million
dwellings
510 million
people
more than
220 million
dwellings
were built
before 2001
7498 MFIs
and
188,109
branches
On average
each branch
serves
around 2,700
people
Private financing
In the EU 28 there are… …of which
This initiative
has huge
potential!
3
Banks can Play a Game Changing Role in Improving Energy Efficiency (EE)
February 2019 Energy Efficient Mortgages Initiative
Underlying risk parameters impacted by EE
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Retrofitting 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
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The ultimate objective is a pan-European private bank financing mechanism,based on a standardised approach, to encourage energy efficient improvementby households of the EU’s housing stock by way of financial incentives linked tothe mortgage, and in this way support the EU in meeting its energy savingstargets. Independent from, but complementary to, public funds or taxincentives.
Underlying business case:
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𝑇0𝑇1
EE Renovation
Energy efficiency advisor (EEA) to advise on:1. Necessary EE
renovation2. Complementar
y 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
Incentive Chain
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Borrower: - Lower energy bills- Energy Efficiency Behaviour- Lower interest rate on mortgage for energy efficient property- Free capital for retrofitting
Issuer/Originator:- Access to funding cost advantages-Increased loss mitigation capacity- Lower capital requirements as a result of lower PD- Reputational benefits
Investor:- Diversification of investor portfolio- Allocation of energy efficient investment buckets- Green added value vs brown discount
SME/ Real Economy: - SMEs active in the retrofitting of buildings and dwellings to become more energy efficient - Juncker Plan
Society:- Reduction in energy consumption- Wealth conservation- Reduction in greenhouse gas emissions
Government:- Pan European plan to stimulate energy efficient investment in residential property- Improvement of existing housing stock- Compliance with 1997 Kyoto Protocol – COP21- Access to quantitative & qualitative database on energy efficient mortgages & covered bonds
February 2019 Energy Efficient Mortgages Initiative
Market Best Practices: White Paper
Overview of current practices in relation to finance, energy efficiency indicators,property valuation and the impact of energy efficiency on risk management
Key recommendations towards the creation of an Energy Efficient Mortgageproduct for Europe
1. A simple & standardised framework for Energy Efficient Mortgage to helpmarket entry allowing for national heterogeneity, with guidance on theunderlying finance mechanism
2. A clear definition of an Energy Efficient Mortgage to enable banks todifferentiate between energy efficient and conventional mortgages in theirrisk management processes
3. Energy efficiency in property valuations. To ensure that energy efficiency isappropriately taken account of in property valuations, banks should beguided on how and what to instruct property valuers in relation to energyperformance of buildings
4. Simple and proportionate energy efficiency performance indicators, withflexibility to take account of differences between current national approaches
www.energyefficientmortgages.eu
The White Paper is available on the energy Efficient Mortgages website:http://eemap.energyefficientmortgages.eu/wp-content/uploads/2018/04/EeMAP-White-Paper.pdf
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EE Impact on
probability
of default
Market Best Practices: Five Technical Reports
The research findings are detailed in five Technical Reports
www.energyefficientmortgages.eu
‘Green’ Finance
Mortgage lending
valuation
Building
Performance
Indicators
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Consumer
Research
Insights
February 2019 Energy Efficient Mortgages Initiative
GDP and Energy Consumption
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Source: Eurostat
950.000
1.000.000
1.050.000
1.100.000
1.150.000
1.200.000
1.250.000
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
in E
UR b
n
Energy consumption evolution in the EU (current composition)
GDP Energy consumption (RHS)
Home, ‘Expensive’ Home
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Around 42% of disposable income of poorer households (below 60% of median income) is spent on housing costs
Source: Eurostat – 2017 EU-SILC survey
42
0
10
20
30
40
50
60
70
80
Housing cost as % of disposable income
below 60% median income above 60% median income
‘Heat or Eat’ Dilemma
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21% of EU population that earn 60% or less than medianincome in their respective countries, over 18 millionpeople, live in a household which they cannot adequatelyheat
This issue has different degrees of relevant according tocountry
Source: Eurostat EU-SILC survey 2017*according to the Survey definition
Owners or Tenants
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Source: Eurostat – 2016 figures
12
29,6
38,2
43,5
31,1
17,6
18,7
9,2
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
below 60% median income above 60% median income
Breakdown of tenure status by income group
owner with mortgage owner without mortgage tenant market price tenant reduced price
In EU breakdown of how citizens live isreflected by their income group
Poorer part of population in Europe(around 86 million people earn less than60% of their respective Member States’median income) typically live as tenants
These individuals are also more than twotimes less likely to have a mortgage thanthe rest of the population
Houses with History
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0%10%20%30%40%50%60%70%80%
Breakdown of age of housing stock according to selected capital cities
before 1945 1945-1970 1971-1990 after 1990
23%
28%29%
20%
EU housing stock age structure
before 1945
1945-1970
1971-1990
after 1990
Pilot Scheme: To begin Solving the ‘Chicken & Egg’ Dilemma
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Assets Liabilities
EE mortgages
• collateral
EE bonds
• Covered Bonds
• Securitisation
European
Investmen
t Fund
(EIF)
European
Investmen
t Bank
(EIB)
Investor Demand
National Promoting Banks:
Green Purchase Programs
February 2019 Energy Efficient Mortgages Initiative
Energy Efficient Mortgages Pilot Scheme
Under the Energy Efficient Mortgages Pilot scheme, Pilot Scheme Banks have the opportunity to analyse the feasibility and voluntarily implement the Energy Efficient Mortgage Product Framework into existing product lines and processes.
On 14 June at the Energy Efficient Mortgages event in Windsor, Pilot Scheme Banks were invited into take part in 7 subgroups to identify the opportunities and risks in various areas (i.e. Origination/retail; risk management; marketing; funding & investor relations; partnerships; IT solutions & Data; development of technical expertise), taking as the starting point the Energy Efficient Mortgage Product Framework, and highlighting potential operational solutions.
For further information:
• Press release, 14 June 2018: "The light turns green: Energy Efficient Mortgages Pilot Scheme goes live!“
• Energy Efficient Mortgages Pilot Scheme Roadmap for Lending Institutions
• Energy Efficient Mortgages Pilot Scheme Pioneers
February 2019 Energy Efficient Mortgages Initiative 16
Pilot Scheme: Existing Data Analysis & Operational Test Phase
17
v
Phase 1: Framework Preparation & Analysis of Existing Data:• Design of Product Framework and
System Set-up• Substantiation of Business Case• Focus on Correlation between EE
and LGD & PD
Phase 2: Operational Test Phase:• Deployment of Product Framework and
High-level Guidelines • Assessment of framework
Implementation• Tag excising Mortgage Loans and begin
Originating EE Mortgage Product• Involvement of the Advisory Council • Data collection
June 2017
June 2018
June 2020
Launch Event, Windsor
February 2019 Energy Efficient Mortgages Initiative
List of Pilot Scheme Banks Involved (i):
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• ABN AMRO (NL)
• Argenta Bank (BE)
• AXA Bank (BE)
• Banca Monte dei Paschi di Siena, BMPS (IT)
• Banco BPM (IT)
• Belfius Bank & Verzekeringen (BE)
• Berlin Hyp AG (DE)
• BNL Gruppo BNP Paribas (IT)
• BNP Paribas Fortis (BE)
• BNP Paribas (UK)
• Groupe BPCE (FR)
• BPER Banca (IT)
• Caisse des Dépôts Group (FR)
• Caixa Geral de Depósitos, CGD (PT)
• Caja Rural de Navarra (ES)
List of Pilot Scheme Banks Involved (ii):
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• Colibri Hypotheken (NL)
• Compagnie de Financement Foncier (FR)
• Crédit Agricole (IT)
• Crelan (BE)
• Deutsche Hypothekenbank (DE)
• Ecology Building Society (UK)
• Friulovest Banca (IT)
• Garanti Bank (RO)
• ING Belgium (BE)
• KBC Bank (BE)
• Mortgage Society of Finland, Hypo (FI)
• Münchener Hypothekenbank eG (DE)
• Norddeutsche Landesbank, NORD/LB (DE)
• Nordea Bank (SE)
List of Pilot Scheme Banks Involved (iii):
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• Nordea Eiendomskreditt (NO)
• Nordea Kredit (DK)
• Nordea Mortgage Bank (FI)
• OP Mortgage Bank (FI)
• Rabobank (NL)
• Raiffeisen Bank (BO)
• Société Générale (FR)
• Société Générale CIB (IT)
• Triodos Bank (BE)
• Triodos Bank (ES)
• UniCredit (IT)
• Unión de Créditos Inmobiliarios, UCI (ES)
• Volksbank Alto Adige (IT)
Members of the Advisory Council:
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• European Commission
• European Investment Bank (EIB)
• European Bank for Reconstruction and Development
(EBRD)
• Scottish Government
• The World Bank
• UNEP Finance Initiative
• International Finance Corporation (IFC)
• Climate Bond Initiative
The main role of the Advisory Council is to help advise and support the
deployment of the Pilot Scheme in the market and explore the possibility
of a ‘regulatory sandbox’ for banks participating in the Pilot Scheme
List of Supporting Organisations Involved (i):
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• Alliance HQE –GBC France (FR)
• AmTrust International
• Asociación Hipotecaria Española (ES)
• Associazione Bancaria Italiana, ABI (IT)
• Cohispania (ES)
• Croatia Green Building Council, CGBC (HR)
• CEN CENELEC
• Dutch Green Building Council (NL)
• European Banking Federation
• European Builders Confederation, EBC
• European Heat Pump Association
• Finance Denmark, FIDA (DK)
• Flemish Construction Confederation, VCB (BE)
• German Sustainable Building Council, DGNB (DE)• Gianni Origoni Grippo Cappelli & Partners (IT)
List of Supporting Organisations Involved (ii):
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• Green Building Council España, GBCe (ES)
• Green Building Council Finland, FIGBC (FI)
• Green Building Council Italia, GBC (IT)
• HP Keymark
• Irish Green Building Council, IGBC (IE)
• Madrid City Council (ES)
• Polish Green Building Council, PLGBC (PL)
• Romania Green Building Council, RoGBC (RO)
• Romanian Association of Banks, ARB (RO)
• S&P Global Ratings
• Tinsa Group (ES)
• UK Green Building Council, UKGBC (UK)
• UK Regulated Covered Bond Council, UK RCBC (UK)
• Union Professionnelle du Crédit/Febelfin (BE)
• Verband deutscher Pfandbriefbanken, vdp (DE)
72 confirmed participants (42 banks and 30 other organisations*)
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*the map shows the location of 61
participants with a clear national link. To
them also 7 international/European
supporting organisations have to be taken
into account
February 2019 Energy Efficient Mortgages Initiative 25
• This map displays latest
state of commitments made
by 42 banks across the EU
to Pilot Scheme.
• In total these banks
represented EUR 3,834
billion (55%) in total
outstanding mortgage loans
of the EU.
*data taken from Hypostat 2018
**figures taken from investor reports of
the participating institutions. 100% is
considered when the national mortgage
association is pilot scheme member
Country
total
number only banks
total outstanding
mortgage market*
mortgage loan
portfolio of
participants**
coverage
in %
BE 10 8 233,224 233,224 100.00
CY 0 0 11,123 0.00
DE 6 4 1,378,810 1,378,810 100.00
DK 2 1 248,776 248,776 100.00
ES 8 3 497,711 497,711 100.00
FI 4 3 96,129 42,380 44.09
FR 5 4 954,226 412,900 43.27
HR 1 0
IE 1 0
IT 11 9 375,398 375,398 100.00
NL 4 3 672,235 470,300 69.96
NO 1 1 270,151 25,800 9.55
PL 1 0
PT 1 1 94,093 28,400 30.18
RO 4 2 14,262 14,262 100.00
SE 1 1 402,250 42,500 10.57
UK 4 2 1,539,979 89,509 5.81
EU/international 7 0
Total EEA 7,295,903 3,859,971 52.91
Total EU 7,013,738 3,834,171 54.67
Total euro area 4,638,134 3,413,323 73.59
Pilot Scheme: Banks Coverage
Coverage of pilot banks to total mortgage outstanding in 2017 *
Energy Efficient Mortgages Initiative 26
*data taken from Hypostat 2018
**figures taken from investor reports of
the participating institutions. 100% is
considered when the national mortgage
association is pilot scheme member
February 2019
Pilot Scheme: Product Framework & Guidelines
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The Energy Efficiency Mortgage Pilot Scheme Product Framework, which should be considered inorder to ensure successful implementation of an Energy Efficient Mortgage product within banks’existing internal procedures, consist of the following sets of high-level guidelines:
I. Implementation Guidelines for BanksII. Building Performance Assessment GuidelinesIII. Valuation Guidelines: Energy Efficiency Checklist
The final Product Framework has incorporated feedback received from the marketconsultation, series of national roundtables and interviews conducted since the publicationof the draft Product Framework in February 2018.
The Pilot Scheme will test the Product Framework in an operational environment andfeedback received from participants will feedback back into the guidelines with a view toreviewing and adjusting the Framework over time as appropriate to respond to the market.
From a Valuation Perspective:
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𝑉𝑎𝑙𝑢𝑒1𝑉𝑎𝑙𝑢𝑒0
𝐸𝑃𝐶0 𝐸𝑃𝐶1 + list of EE improvements
𝑆𝑚𝑎𝑟𝑡𝑚𝑒𝑡𝑒𝑟
Pilot Scheme: Looking for Market SolutionsIdentification of Critical Areas
February 2019 Energy Efficient Mortgages Initiative 29
Pilot
Schem
e:
Mark
et
Thin
k-T
hank • Facilitation of simplified EEM asset value chain (i.e. previous slides)
• How to incorporate and maximise the EPC standard
• Certification/guarantee of EE improvements (i.e. previous slides)
• How best to link and capture dynamic datasets
• Commercial partnership between banks and utility providers
• Areas to be examined:
o Origination/Retail
o Risk Management
o Marketing
o Funding & Investor relations
o Partnerships (development of synergies with other stakeholders)
o IT Solutions & Data
o Development of technical expertise (SMEs, Valuers, Energy
Efficiency experts)
The preliminary findings were presented on 27 September 2018 in
Venice (presentation materials)
The Energy Efficient Mortgage Process
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Covered Bond Label: SustainableCovered Bonds
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The Labelled Sustainable Covered Bond Definition:
Definition of an Energy Efficient Mortgage
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To consult the full definition, please click here
To read the press release, please click here
EEMs are intended to finance the purchase/construction and/or renovation of both residential (single family & multi-family) and commercial buildings where there is evidence of: (1) energy performance which meets or exceeds relevant market best practice standards in line with current EU legislative requirements and/or (2) an improvement in energy performance of at least 30%.
This evidence should be provided by way of a recent EPC rating or score, complemented by an estimation of the value of the property according to the standards required under existing EU legislation. It should specifically detail the existing energy efficiency measures in line with the EEM Valuation & Energy Efficiency Checklist.
Pilot Scheme: Establishment of National Market Hubs
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Pilot Scheme Organisations are organising themselves into National Market Hubs, with a view to achieving coordination at national level and ensuring market consensus and implementation for energy efficient mortgages (EEMs).
National Market Hubs will be supported by an Energy Efficient Mortgage Label Committee, comprised of representatives of major mortgage markets and other relevant market stakeholders at EU level, which will ensure ongoing alignment of the EEM definition with high quality standards and market best practice at EU and national level by way of a European label for EEMs.
3 Workstreams:• EEM product development • Data • Partnerships/stakeholder
Upcoming Event
February 2019 Energy Efficient Mortgages Initiative 34
Energy Efficient Mortgages Events
Riga, Latvia
24 April 2019
The EeMAP and EeDaPP projects have received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreements No 746205 and 784979
Partners
For additional information on the Energy Efficient Mortgages Initiative
Visit: Contact:
Luca BertalotSecretary General of the [email protected]