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

The report Green Tagging: Mobilising Bank Finance for Energy Efficiency in Real Estate presents the findings and recommendations from a survey of green tagging practices among 10 European banks. It finds that green tagging around real estate and energy efficiency is growing at a critical time.

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

• 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.
• 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.
• The financial case is sufficiently compelling for banks to undertake green tagging without a perfect, multi-annual green performance data history.
• 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.
• 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.