Energy efficient Mortgages Action Plan (EeMAP) & Energy - - PowerPoint PPT Presentation

Energy efficient Mortgages Action Plan (EeMAP) & Energy efficiency Data Protocol and Portal (EeDaPP)

The Initiative

December 2018 Energy Efficient Mortgages Initiative 2

The Energy Efficient Mortgages Initiative is aimed at delivering a standardised European framework and data collection process for energy efficient mortgages, with favourable financing conditions for energy efficient buildings and energy saving renovations. It consists of two parallel projects, the “Energy efficient Mortgages Action Plan” (EeMAP) and the “Energy efficiency Data Protocol and Portal” (EeDaPP), and is funded via the European 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!

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Banks can Play a Game Changing Role in Improving Energy Efficiency (EE)

December 2018 Energy Efficient Mortgages Initiative

Underlying risk parameters impacted by EE

December 2018 Energy Efficient Mortgages Initiative 4

Retrofitting impacts positively on property value ensuring wealth conservation & loss mitigation by preventing “brown EE leads to a reduction in the impact of energy costs to income, reducing borrowers‘ probability

• f default

Objective & Underlying Business Case

December 2018 Energy Efficient Mortgages Initiative 5

The ultimate objective is a pan-European private bank financing mechanism, based on a standardised approach, to encourage energy efficient improvement by households of the EU’s housing stock by way of financial incentives linked to the mortgage, and in this way support the EU in meeting its energy savings

• targets. Independent from, but complementary to, public funds or tax

incentives. Underlying business case:

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𝑈0 𝑈

1

EE Renovation

Energy efficiency advisor (EEA) to advise on: 1. Necessary EE renovation 2. Complementar y funding sources (subsidies) Mortgage applicatio n

Before EE Renovation

SME carries

• ut 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

• n 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
• n energy efficient mortgages & covered bonds

December 2018 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 Mortgage product for Europe

• 1. A simple & standardised framework for Energy Efficient Mortgage to help

market entry allowing for national heterogeneity, with guidance on the underlying finance mechanism

• 2. A clear definition of an Energy Efficient Mortgage to enable banks to

differentiate between energy efficient and conventional mortgages in their risk management processes

• 3. Energy efficiency in property valuations. To ensure that energy efficiency is

appropriately taken account of in property valuations, banks should be guided on how and what to instruct property valuers in relation to energy performance of buildings

• 4. Simple and proportionate energy efficiency performance indicators, with

flexibility 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

• f 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

December 2018 Energy Efficient Mortgages Initiative

GDP and Energy Consumption

December 2018 Energy Efficient Mortgages Initiative 10

Source: Eurostat

950,000 1,000,000 1,050,000 1,100,000 1,150,000 1,200,000 1,250,000 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 EUR bn

Energy consumption evolution in the EU (current composition)

GDP Energy consumption (RHS)

Home, ‘Expensive’ Home

December 2018 Energy Efficient Mortgages Initiative 11

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 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

December 2018 Energy Efficient Mortgages Initiative 12 ▪ 21% of EU population that earn 60% or less than median

income in their respective countries, over 18 million people, live in a household which they cannot adequately heat

▪ This issue has different degrees of relevant according to

country

Source: Eurostat EU-SILC survey 2017 *according to the Survey definition

Owners or Tenants

December 2018 Energy Efficient Mortgages Initiative 13

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

• wner with mortgage
• wner without mortgage

tenant market price tenant reduced price

▪ In EU breakdown of how citizens live is

reflected by their income group

▪ Poorer part of population in Europe

(around 86 million people earn less than 60% of their respective Member States’ median income) typically live as tenants

▪ These individuals are also more than two

times less likely to have a mortgage than the rest of the population

Houses with History

December 2018 Energy Efficient Mortgages Initiative 14

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

December 2018 Energy Efficient Mortgages Initiative

Energy Efficient Mortgages Pilot Scheme

Under the Energy Efficient Mortgages Pilot scheme, Pilot Scheme Banks have the

• pportunity 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

December 2018 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

December 2018 Energy Efficient Mortgages Initiative

List of Pilot Scheme Banks Involved (i):

December 2018 Energy Efficient Mortgages Initiative 18

• 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)
• 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):

December 2018 Energy Efficient Mortgages Initiative 19

• 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):

December 2018 Energy Efficient Mortgages Initiative 20

• Nordea Eiendomskreditt (NO)
• Nordea Kredit (DK)
• Nordea Mortgage Bank (FI)
• OP Mortgage Bank (FI)
• Rabobank (NL)
• Raiffeisen Bank (RO)
• Société Générale (FR)
• Société Générale (IT)
• Triodos Bank (BE)
• Triodos Bank (ES)
• UniCredit (IT)
• Unión de Créditos Inmobiliarios, UCI (ES)
• Volksbank Alto Adige (IT)

Members of the Advisory Council:

December 2018 Energy Efficient Mortgages Initiative 21

• 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

• f a ‘regulatory sandbox’ for banks participating in the Pilot Scheme

List of Supporting Organisations Involved (i):

December 2018 Energy Efficient Mortgages Initiative 22

• 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
• Finance Denmark, FIDA (DK)
• Flemish Construction Confederation, VCB (BE)
• German Sustainable Building Council, DGNB (DE)
• Green Building Council España, GBCe (ES)

List of Supporting Organisations Involved (ii):

December 2018 Energy Efficient Mortgages Initiative 23

• Green Building Council Finland, FIGBC (FI)
• Green Building Council Italia, GBC (IT)
• 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)

68 confirmed participants (41 banks and 27 other organisations*)

December 2018 Energy Efficient Mortgages Initiative 24

*the map shows the location of 61 participants with a clear national link. To them also 5 international/European supporting organisations have to be taken into account

Pilot Scheme: Banks Coverage

December 2018 Energy Efficient Mortgages Initiative 25

• This

map displays latest state of commitments made by 41 banks across the EU to Pilot Scheme.

• In

total these banks represented EUR 3,834 billion (55%) in total

• utstanding mortgage loans
• f 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

• nly banks

total outstanding mortgage market* mortgage loan portfolio of participants** coverage in % BE 10 8

233,224 233,224

100.00 CY

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 IE 1 IT 10 8

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 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 5 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

Coverage of pilot banks to total mortgage

• utstanding in 2017 *

December 2018 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

Pilot Scheme: Product Framework & Guidelines

December 2018 Energy Efficient Mortgages Initiative 27

The Energy Efficiency Mortgage Pilot Scheme Product Framework, which should be considered in

• rder 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 Banks II. Building Performance Assessment Guidelines

• III. Valuation Guidelines: Energy Efficiency Checklist

The final Product Framework has incorporated feedback received from the market consultation, series of national roundtables and interviews conducted since the publication

• f the draft Product Framework in February 2018.

The Pilot Scheme will test the Product Framework in an operational environment and feedback received from participants will feedback back into the guidelines with a view to reviewing and adjusting the Framework over time as appropriate to respond to the market.

From a Valuation Perspective:

December 2018 Energy Efficient Mortgages Initiative 28

𝑊𝑏𝑚𝑣𝑓1 𝑊𝑏𝑚𝑣𝑓0 𝐹𝑄𝐷0 𝐹𝑄𝐷1 + list of EE improvements 𝑇𝑛𝑏𝑠𝑢 𝑛𝑓𝑢𝑓𝑠

Pilot Scheme: Looking for Market Solutions

Identification of Critical Areas

December 2018 Energy Efficient Mortgages Initiative 29

Pilot Scheme: Market Think-Thank

• 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:
• Origination/Retail
• Risk Management
• Marketing
• Funding & Investor relations
• Partnerships (development of synergies with other stakeholders)
• IT Solutions & Data
• 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

December 2018 Energy Efficient Mortgages Initiative 30

Covered Bond Label: Sustainable Covered Bonds

December 2018 Energy Efficient Mortgages Initiative 31

The Labelled Sustainable Covered Bond Definition:

Definition of an Energy Efficient Mortgage

December 2018 Energy Efficient Mortgages Initiative 32

To consult the definition, please click here To read the press release, please click here

Upcoming Event

December 2018 Energy Efficient Mortgages Initiative 33

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 Bertalot Secretary General of the EMF-ECBC lbertalot@hypo.org