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Natural Environment

EU Renovation Wave: A green investment fit for the future?

The EU Renovation Wave is an ambitious programme aiming to double the rate at which the bloc's existing building stock is renovated. It promises to cut emissions, boost the COVID-19 recovery, create jobs and reduce energy poverty. Without cross-sector collaboration, these promises may remain unfulfilled.

Sander Scheurwater, Director of Communications, Marketing and External Affairs, Europe, RICS
3 November 2020

The European Commission presented its ambitious Renovation Wave proposals on 14 October 2020, fully demonstrating the urgent importance of addressing sustainability shortfalls in existing buildings. A few salient figures:

  • 85% of buildings in the EU were built over 20 years ago, and 85-95% are expected to still be standing in 2050
  • By 2030, 35 million buildings could be renovated and up to 160,000 additional jobs created
  • The European Commission aims to at least double renovation rates in the next ten years.

With many of the world’s brightest minds currently focused on flattening the curve, here we have one curve that should soon be reaching skywards. And so, we dedicated our recent European WBEF webinar to the Renovation Wave, and the important roles to be played by the public, private and investment sectors.

Energy efficient renovation – A green investment fit for the future

One of the challenges for the financial sector is the lack of suitable strategies, processes and products for financing small-scale, tailored sustainable projects. Energy efficient retrofits of buildings is such a challenge. The opportunities for efficiency improvement are often fragmented and hidden, and therefore hard to capture for investors. Next to the need for financial sector to offer suitable products, national governments also have a key role to play to ensure the renovation wave becomes a reality.

Public sector leadership…

The Renovation Wave strategy addresses not only decarbonisation and energy efficiency, but sustainable construction, energy poverty and healthy housing. So explains Hadrien Michel, Policy Officer at the Directorate General for Climate Action, within the EU Commission’s Finance for Innovation cluster. He adds that a substantial budget has been set aside for research and development, direct investment and addressing barriers to market entry.

There is an inherent complexity in tackling all these challenges simultaneously, which cannot be overcome by the public sector alone. Expert input will be a vital ingredient. Frank Hovorka, Chair of the RICS Advisory Board in France, explains this is exactly what was provided by RICS professionals entrusted by the French Government to provide renovation recommendations. The result was a 93-page report, released in September 2020, containing 43 proposals which, all together, comprise a vision for green renovation at neighbourhood, rather than single building, scale. In France, the renovation rate is around 1%, though in some cities it has reached 5%. This, argues Hovorka, is the rate that Europe should be targeting.

…private sector engagement…

To achieve such ambitious targets, we need innovative solutions. Céline Carré, Head of Public Affairs at multinational construction firm Saint-Gobain, believes that Renovation Wave legislation must be packaged in such a way as to aid private sector participation. Adam Targowski, Sustain-ovation Manager at Skanska, notes that the purpose of buildings is to provide a comfortable climate for those they house. Energy consumption, therefore, is simply buildings serving their purpose. He agrees with Frank Hovorka that the only way that renovation can be successful is to upscale from a house-by-house to a neighbourhood-by-neighbourhood approach. But he warns that the nature of the challenge changes according to particular facets of geography and history. In his home city of Warsaw, like much of Eastern Europe, energy efficiency was not a priority during the design and construction of much extant housing stock.

RICS professionals were asked by the French Government to provide renovation recommendations. The result was a 93-page report containing 43 proposals which comprise a vision for green renovation at neighbourhood scale.

…and financial stimulus…

Political initiatives and private sector innovations cannot move beyond the ideation stage without appropriate financial support. Luca Bertalot, Secretary General at the European Mortgage Federation (EMF) and European Covered Bonds Council (ECBC), advocates the need to rethink everything. He invokes the spirit of the Renaissance when urging stakeholders to completely reimagine the European built environment, making energy efficiency the chief priority. And he’s as good as his word: the EMF is leading the development of energy efficient mortgages, currently being piloted by over 60 banks across the continent.

Investors also need to play their part. Roger Baumann, COO & Head of Product Development – Global Real Estate with Zurich Insurance Company, echoes the points made by other panellists on the need for cooperation. In doing so, he cites the “Business Ambition for 1.5 °C initiative” and the “UN Net-Zero Asset Owner Alliance” as exemplary.

…in combination can make Renovation Wave a success

So, are we currently doing enough to bring these ambitions to life? The short answer is no – not yet. But if our discussion proves anything, it is that there are many actors in the public, private and finance sectors willing and ready to answer the call. And while our panel may be split on the extent to which we have to ramp up the renovation, they are unanimous on the pressing need to renovate. In the words of Luca Bertalot this could be the start of “a new European renaissance”.