According to the EU taxonomy, an investment can be classified as green or sustainable, if it relates to:
- An existing building that is in the top 15% of local buildings for energy efficiency (a goalpost that will shift closer to zero carbon every three years);
- A retrofit project leading to a 30% energy efficiency improvement across affected buildings;
- A new building performing 10% better than a yet-to-be-established baseline (this will be clarified in a forthcoming European building standard).
Embodied carbon, notes Kidney, is not covered by any of the above.
The Climate Bonds Initiative is working closely with the European Mortgage Federation on the Energy Efficient Mortgages Initiative. The aim is to improve banks’ understanding of the taxonomy rules, and ease their eventual implementation.
Jennifer Johnson, Deputy Secretary-General of the European Mortgage Federation, explains how the Energy Efficient Mortgages Initiative (EEMI) has moved the dial on sustainable finance in Europe.
The purpose of EEMI is to catalyse a new integrated multi-stakeholder energy efficient mortgage ecosystem and, by extension, improve the EU’s ageing building stock. All stakeholders, including banks, have a moral obligation to finance the energy transition. EEMI shows that good climate-sense is good business-sense by linking sustainability measures to credit risk.
Through the development of an Energy Efficient Mortgage Label and EU taxonomy compliant Disclosure Template, banks will have the tools to collect and disclose information on their green activities. This, in turn, will unlock private funding for energy transition projects and help move Europe towards carbon neutrality by 2050.
Olivier Elamine, Chief Executive of German-based REIT Alstria Office, and member of the sustainability committee of the European Public Real Estate Association, paints a less optimistic picture.
When it comes to action on emissions, he argues that the real estate sector is good at “talking-the-talk” but is yet to “walk-the-walk”. Historically low, nearly-zero interest rates, mean that plenty of money is incoming. It is not yet clear whether this investment will help or hinder the sector in its climate adaptation ambitions.
He also echoes Sean Kidney in lamenting the lack of meaningful action on embodied carbon and cites an apparent general reluctance to honestly discuss the upfront costs of decarbonisation. It is time, he says, for policymakers to be decisive and introduce potentially unpopular but desperately necessary measures – including carbon taxes.