Green Tagging: Mobilising Bank Finance for Energy Efficiency in Real Estate

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Authors: Nick Robins    Peter Sweatman   

Published By: UNEP Inquiry    Climate Strategy & Partners   

Date: Dec 2017

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Green Tagging: Mobilising Bank Finance for Energy Efficiency in Real Estate

This report finds that green tagging around real estate and energy efficiency is growing at a critical time.

Based on a survey of the 10 participating banks, the report identifies five key trends around green tagging:

  1. New green business opportunities are a stronger incentive for green tagging than improved risk management for banks. This practice is often led by commercial real estate groups and wholesale finance in banks.
  2. While there is no clear definition of “green”, energy efficiency and greenhouse gas emissions are the green attributes seen as most material by banks and their stakeholders.
  3. The financial case is sufficiently compelling for banks to undertake green tagging without a perfect, multi-annual green performance data history.
  4. There is a strong case for connecting green tagging with the links between sustainability factors and prudential regulation as the inherent risks of non-green assets is not yet a leading driver for banks to implement green tagging.
  5. Financial institutions want to continue to investigate the correlations between financial performance in mortgage portfolios with energy performance.

The report concludes by recommending series of next steps for 2018: assess the quantitative relationships between building performance and loan performance; build a common EU database of EPCs and other building data; evaluate the links between building performance and regulatory capital; focus on real estate as a pilot for a common classification system; connect green tagging with the new EU securitisation rules.

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