28 April 2022
The current geopolitical context, the energy crisis and climate change are making it increasingly necessary to radically rethink the regulatory framework and market best practices. The need for a real change of pace in the coordination of national and European policies opens up new scenarios that have perhaps never been seen before.
The sharing of strategic resources, a common and shared policy, which are the very essence of the European Union, remain the main road to follow in this time of crisis. I believe that a clear fil rouge can be traced between Robert Schuman’s declaration of 9 May 1950: “World peace cannot be safeguarded without the making of creative efforts proportionate to the dangers which threaten it.” and the words of European Commission Vice-President Frans Timmermans: “It is time we tackle our vulnerabilities and rapidly become more independent in our energy choices.” in the 8 March 2022 announcement of the “RePowerEU” plan.
This fil rouge underlines what Herder and Goethe would have called the Zeitgeist, the ‘spirit of the times’, with which we must read the history of mankind and each of us can change the course of events and decide our own destiny.
The “RePowerEU” plan, technically ambitious and politically revolutionary, envisages diversifying supplies, increasing production and importing volumes of biomethane and renewable hydrogen, creating a European platform for joint gas purchases and storage, and tripling supplies by next winter. In addition, a new temporary framework of state aid to businesses is envisaged. In this sense, the plan represents an ideological turning point, reorienting the legislative architrave developed in recent years in the finance and energy fields.
This turning point is already profoundly influencing the current political and legislative debates on crucial market dossiers such as the EU Taxonomy, the Energy Performance of Buildings Directive, the implementation of the final Basel III Reforms and, more generally, across the board, all issues related to digitalisation and sustainability.
The key to interpreting these new dynamics has to be found in the political perimeter outlined by the “Next Generation EU”, which is intended to build the foundations for a common European home and give the keys to a future full of opportunities to the upcoming generations.
The housing sector is key to the development of a clear market roadmap that will enable the European Union to achieve its goal of reducing greenhouse gas emissions. Indeed, housing is a strategic sector not only because homes are the main place where people spend their lives and, increasingly, work, but also because they account for 40% of CO2 emissions in continental Europe.
The scale of the investment needed to improve the energy performance of more than 220 million homes in order to meet the EU’s energy saving targets is huge and cannot be achieved by the public sector alone. The EU financial sector has a central role to play in the transition to a more sustainable economy, reducing energy poverty for households, safeguarding consumers’ wealth in terms of disposable income and asset value and supporting economic growth and job creation. In this context, it is of strategic importance to align the interests of lenders, investors, SMEs, utilities and, above all, consumers in multi-service platforms at European level. If we are to reach our 2030 targets, almost 500,000 homes in Europe must be upgraded every week.
The real breakthrough of a net-zero Europe will come through the large-scale use of green mortgages. Today, the mortgage market is equivalent to around 46% of the EU’s GDP. Facilitating the transition to green mortgages is crucial to achieving a climate neutral economy, as highlighted by the Energy Efficient Mortgages Initiative (EEMI) which seeks to introduce a greener, sustainability-focused system for purchasing, renovating and living in homes. There is therefore a need for in-depth energy upgrading.
In this respect, it is important to ask how much it costs each owner, individual or family, to make the necessary jump in energy class: the answer is at least 25-30 thousand euros of investment. There are not many who can afford these sums without systemic help/stimulus. The problem is that if the necessary “green” improvements are not made, there will inevitably be a net and tangible loss in energy consumption.
A family can save up to 70% on its energy bills with an investment that achieves two jumps in energy class, which today translates concretely into defending the purchasing power of families by mitigating the effect of inflation on disposable income. So where can these amounts come from? From public subsidies, at local, regional or state level or from private finance markets, based on a wide range of product offerings which meet consumer needs and support the climate transition in the process?
Member States cannot fully assume this huge burden on public debt, which would mean shifting the cost to future generations, so we have to build an mechanism which brings together public and private stakeholders, working in coordination and leveraging each other’s contributions and actions. The contribution of financial markets, if combined with public intervention and structured in the right way, can give life and impetus to a genuine green renaissance, capable of giving an economic boost not only to the mortgage, construction, and real estate industries but to the entire economy. The positive repercussions would be felt not only from an environmental point of view, but also in terms of employment, research and development, certification, and the professional skills involved in this work.
At the heart of the Energy Efficient Mortgages Initiative (EEMI) are efforts to boost and support consumer demand for building energy renovation by way of an energy efficient mortgage ‘ecosystem’. Bringing together a wide range of relevant market players, including lenders, investors, SMEs and utilities, the EEMI is aligning strategies and actions through a new, innovative market mechanism focussed on a green ‘fulcrum’ of products, services and data, delivered by way of a ‘one stop shop’.
With the overall objectives of optimising the end-to-end customer journey and experience, deploying market interventions and partnerships that support delivery and therefore maximising benefits for consumers, the EEMI is concretely building an open source platform at the centre of the ‘ecosystem’, which will:
The EEMI will build a constellation of national platforms focussed on local characteristics and implementation needs but with a European footprint. The EEMI governance structure, combining the European-level EEM Label and Advisory Council with the EEMI national hubs, will provide the European coordination of national actions, including institutional interventions, which will support timely and cost optimised coordination between and amongst the public and private market sectors
There is also another very important aspect to this new green ecosystem narrative. As pointed out earlier, the home is a very special place where people spend at least one third to more than half of their lives. This makes it an ideal focal point for financial education for citizens as consumers by embedding a new culture with greener microeconomic decisions in support of a transition economy.
Such an exercise should not be seen as ‘just’ a philanthropic decision taken by already environmentally conscious people who also tend to be more affluent. It will be a win-win solution especially for those families for whom it is more difficult to make ends meet and who are more likely to live in less energy-efficient homes and for whom running and living costs represent a larger share of their budget.
In this time of unprecedented crisis, we must turn challenges into opportunities, looking the next generation in the eyes. Our homes, the place where we raise our children, are at the heart of our lives and interests: exactly like the word ‘Home’, οἴκος (oikos) at the heart of the ancient Greek word ‘oikonomia’.
A sustainable economy has to be built around the concept of ‘Home’, the cornerstone of citizens’ interest, centred on an ESG ‘ecosystem’ that promotes green values and raises environmental awareness.
We need to lay the foundations for a win-win market paradigm which secures both economic growth and financial stability. We need to lay the foundations for a Green Renaissance rooted in a new perspective of sustainability, digitalisation and social inclusion that makes this possible.
By Luca Bertalot, EMF-ECBC Secretary General & EEMI Coordinator
Established in 1967, the European Mortgage Federation (EMF) is the voice of the European mortgage industry on the retail side of the business, representing the interests of mortgage lenders at European level.
