Data and Disclosure are Key for Green Mortgage Analysis

Consistent definitions of environmentally performant buildings will improve the analysis of green mortgages relative to conventional mortgages backing European RMBS, covered bond and securitized product deals. Environmental considerations are seen to improve the credit profile of mortgages and the deal structures they support, e.g. Green Storm is a Dutch Green RMBS deal issued by Obvion and rated by Fitch which shows favorable credit quality relative to conventional RMBS deals from the same originator. While numerous studies indicate favorable credit quality associated with green mortgages; consistent, standardized and comparable data will improve analysis. Favorable performance is said to be attributable to higher credit quality debtors, greater disposable income from reduced energy costs and lower interest expenditure if lenders offer discounted financing for energy efficient properties. The European Commission launched a consultation on November 20 on the EU Taxonomy on two sets of criteria for economic activities to qualify as economically sustainable under the EU’s Taxonomy classification system, including technical screening criteria for determining whether new and existing residential buildings contribute to mitigating climate change and do not harm other environmental objectives.