Derisking investments into green buildings (Podcast)


Energy efficiency is becoming more and more recognised as a cost-effective mitigation measure for achieving the Paris Agreement and SDGs, however, it is considered a not very tangible, not too sexy, relatively fragmented and small-scale efforts. The question that many actors are facing in the field is to how to bring the scale to Energy Efficiency on the local, national and global level.

Key message:

Derisking buildings through green mortgages can help to bring scale to energy efficiency investments.


[00:00:04.140] – Aristeidis Tsakiris

Hello and welcome to the podcast series scaling up energy efficiency. This is Episode 1. And today’s topic is derisking investment into green buildings. We are podcasting from one of the happiest places in the world. Copenhagen. My name is Aristeidis and I work as a program officer at the Copenhagen centre on energy efficiency a part of the UNEP DTU Partnership. So without further ado here is your host Ksenia Petrichenko senior advisor who will moderate today’s podcast.

[00:00:37.620] – Ksenia Petrichenko

Welcome to scaling up energy efficiency podcast. My name is Ksenia Petrichenko and I’m a senior advisor at the Copenhagen center on energy efficiency. In this podcast series we are discussing different topics in the field of energy efficiency with a particular focus on how can we bring scale to energy efficiency efforts and today we have a conversation with our guest Steven Borncamp about green homes and the ways to encourage investments in such projects.

[00:01:08.890] – Ksenia Petrichenko

Steven has assisted the development of eight green building councils in Europe served as the electric chair of the Europe Green Building Council network’s education task force and a successful campaign to promote the Living Building Challenge in Europe as well as other deep green initiatives he led the development of the Romanian Green Building Council’s green mortgage program that provides discounted financing for environmentally responsible homes. This program is now expanding with the support of a European Commission Horizon 2020 grants to 11 EU countries. While Steven you have done a really impressive job on bringing green buildings projects in Europe to the next level and we are really happy to have you here with us today.

[00:01:57.730] – Ksenia Petrichenko


[00:01:58.480] – Steven Borncamp

Thank you I appreciate. Appreciate the chance to talk.

[00:02:01.030] – Ksenia Petrichenko

Yeah. That’s great. I know you are very passionate about the topic so let’s just start by talking a little bit about what does this concept of green homes what it entails as it is my impression that there still might be some confusion even at the conceptual level. So just tell us your understanding of green homes and what’s it about.

[00:02:26.060] – Steven Borncamp

Sure. So I would say first I would define green homes as let’s say not only the usual definition that we talk about the the energy efficiency and other criteria like sustainable landscaping and access to public transit. But I would look in the greater context to say a green home really needs to be the types of structures we have to be renovating and building that can accommodate when we have 9 billion people on the planet and everybody wanting to consume what kind of structures we have to go. And I’d say very very succinctly what I what I really like is that the Living Building Challenge uses the metaphor that a building should have an impact of a flower. And I think that implies net zero energy that implies zero waste. That implies using only I’m not not using virgin land but using Brownfield in lots of different very sort of ambitious topics but all of quite possible.

[00:03:32.880] – Ksenia Petrichenko

From a homeowner perspective or from a perspective of a person who is choosing a home. Why would someone go with a green building home bring home rather than an average home and what are the advantages

[00:03:47.000] – Steven Borncamp

So often the the the cost profile is very essential. It’s we often we think about the sales price of a home that we purchase. But in reality most of us instead of writing one large check we end up writing a lot of little checks per year to the bank. Times 20 or 30 years. So what is most important is that the total cost of ownership of a green home is significantly less than a poorly built home. Or let’s say maybe a more standard home. So this this is something and then on top of that there’s a lot of other benefits natural day lighting that’s encouraged in in buildings. Everybody enjoys this and a lot of homes are sold and people don’t know why they enjoy it but a lot of times the features they like are actually related to really green building features. So so this is something I think you you have not only the cost profile but also the appeal of the home and the value over time with it which is important to the buyer that A that they have this that they have a very strong asset.

[00:05:00.200] – Ksenia Petrichenko

That sounds like a wonderful place to live then. I’m curious then why why we still probably have relatively small scale when it comes to green homes energy efficient homes green buildings and so on so forth and there are certain barriers which prohibit asked for as consumers for choosing green homes. Or is it more barriers on the industry side or policy side.

[00:05:33.800] – Steven Borncamp

I think if we look at two sides that maybe there’s the systemic problem itself in that builders don’t want to build if buyers aren’t asking buyers won’t ask if they don’t understand but they probably won’t understand if they if they never get to see examples of green homes. The industry that the building industry the products manufacturers they won’t really be promoting and supplying their best things if they’re not sure there’s a demand there probably needs they need to focus on what is selling today. So everyone is sort of waiting for everyone else to get moving. And so this is something that that we have to break through and we’ve seen a lot of breakthroughs on the commercial side of buildings with LEED and bring them in and a lot of the great work of the various certification schemes have gotten those industries moving on the residential side. It’s it’s quite far behind and I think that the other side of it is on a worldwide scale. I did a sort of rough calculation in I believe about 1 billion maybe one point five billion people around the planet live in environments that have good building codes and properly enforced building codes. And on top of that also access to residential finance so that leaves a huge part of the world today. And again if we add another one to two billion people over the next two three decades and then all of those people start to consume more that that than than they’re doing today we really have a huge issue. I mean as far as resource use and environmental impact. And so because most of the planet really doesn’t. I would say either that they don’t have access to finance or perhaps they don’t appreciate that. That the wisdom of bringing the proper amount of financial resources early into the building process is really going to be their best decision and it will. It will not cost the money it will actually save the money and it won’t take them seven years to save money. They will start saving immediately because the benefits start arriving as soon as you occupy a green home. So. So I think this is this is really what’s been inhibiting is this sort of maybe a short termism that says I want to minimize the cost of construction and I’m going to do that by working with friends and family by maybe I’ll build over seven to ten years. I definitely don’t want to take a loan because I’ll have to pay interest on that. And it sounds perhaps understandable based on people’s situations but the reality is they end up radically under investing in what is a complex process of of building a quality home.

[00:08:23.740] – Ksenia Petrichenko

Right. So I definitely understand your point so you think that that’s one of the solutions would be to really stimulate the demand from the consumers and to invest and really go for this kind of green homes solutions and choose the long term vision and long term benefits which green home brings into their lives on a number of levels as opposed to some short term solutions driven by cost constraints or their choice practices. And their vision of how they should go about the construction process or the process of buying a new home. So then my question would be obviously you have been in the in this field for really long time and you did a great job on a number of projects. So what what do you think would be the our strategy as the expert community and what can we do to help to encourage this demand. What are the best practices or potential ways of creating and the scale for this kind of projects and to promoting them among consumers general public and any other stakeholders which are very important in this area.

[00:09:44.770] – Steven Borncamp

So I think one of the things that the expert community can do is really take a multidisciplinary approach to the problem in that it is not an issue that the technology is not ready or not affordable or designing construction professionals for example don’t quite know what to do how to build green homes and entertain and really mainstream energy efficiency. It’s really a systemic problem that we have to bring everybody together and we have to make sure that the conversations that are trying to advance this bring in all the different stakeholders and really focus on what do they need. What do they know what’s inhibiting each group. And that if we can help solve each other’s problems and bring a better understanding of the of the system wide benefits of doing this better then we’re going to move forward. And I would just use a quick example from the banking industry. One of the things we’ve been working on is trying to show them the benefits that the risk reduction benefits that green mortgages bring which of course with risk reduction you can end up lowering the cost of finance while still maintaining profitability because you’re at your risk of loss goes down. So this allows them to have new interesting products to gain market share and maybe finance things that now become more affordable. So I think it’s it’s definitely something we have to continue really looking at the system as a whole rather than trying to find a particular breakthrough for one of the segments

[00:11:23.970] – Ksenia Petrichenko

I Yes and I think you raised a very important point which. And I want to follow up on a farm in a bit more details. One is as really as you emphasize the various stakeholders groups which have to be involved and I think also having background and having worked with energy efficiency in buildings for quite a while. This is really striking feature of the sector that they have so many stakeholders with different interests and it is a huge facilitation challenge to mitigate between all of them to come together and actually come up with a interesting bankable and beneficial project or for everyone. So I think I totally agree with you on this point. And the second one is the relationship of banks because obviously when it comes to energy efficiency it’s always very often if this perceived something as less tangible maybe less profitable or less compatible to other solutions. And I’m wondering what have your strategies been like to really talk to the banks and to explain how the risk of investing and giving the loans into green home projects or energy efficiency projects can be mitigated.

[00:12:51.790] – Steven Borncamp

So definitely by focusing on their needs which are to reduce risk but also to find great clients and interesting projects to associate themselves with and also maintain the value of the assets that they’re financing over time. I think focusing on that is is really the way to go. And and there is a lot of good research now that shows that green homes reduce mortgage default risk. They also have better values over time and these are sort of music to the banks. Here’s what we tried to explain also to the banks is that of course income is essential and a person with a good and growing income can always pay for a bad house and still maintain their mortgage payment. That being said if two incomes were equal then it’s better to loan to the Green home they’re going to perform well. Another thing that we did we brought in the National Bank of Romania which I believe is quite innovative on this topic. They allow Romanian citizens when applying to the green mortgage program good to do a mortgage program in general. They can put energy savings onto their mortgage application as other income so that is basically a national bank saying energy savings is equivalent income which the way sounds obvious but it really I think is a concept that needs a greater understanding. And now we’ve seen the there’s a consortium the network greening the financial system the consortium of 30 or so primarily European banks that are saying the banking industry really has to look at these look at their climate risk in their balance sheets and in their other financials and they have to start thinking about products and aligning this to solve this problem. So so this voice from above I think is going to really help to convince the retail mortgage lenders that they have to take action. So we definitely we feel them sort of the business benefit of financing these type of product projects. And at the same time to show them the direction that their regulators and central banks are going.

[00:15:16.340] – Ksenia Petrichenko

You mentioned the certification. And I think we haven’t discussed it so far in great detail but I think it’s one of the key if I understand correctly it’s one of the key tools to lower the risk off of the loan for the bank. Oh and would you speak a bit more about what this certification is and what the what are the success factors for you from your work and maybe some examples from either Romania or any other countries you are working on green mortgage programs.

[00:15:57.810] – Steven Borncamp

So I think one of the first things that certification does is it it takes a lot of the complexity away from the bank when they’re trying to take a decision. The certification helps the bank in a very easy way say yes this does bring home or no it’s not. So that’s I think one of the big values now beneath all of that of course is a lot of complexity that has to be dealt with what is level of energy efficiency. What are the other many green criteria that project has to imply that certification tells the buyer that they can rely on promises made for that project will be delivered when it’s done. We had a great example in Bucharest when we started the green homes green mortgage program there was a developer named I was the norm who had been doing some very nice high quality residential projects in Romania prior but then they set out to build a series of net zero energy villas and so we started working with them and they basically designed project a project that already complies with future European standards for net zero building. And so this was ahead of schedule. They they were doing it on a commercial basis not not as an experiment but as a as a professional commercial development. And so we also looked at this project and we determined that this project saves two mortgage payments worth of energy saving per year. So if we think of this in terms from the bank’s perspective the buyers of these homes have effectively make and mortgage payment year versus a standard home where someone would have to make both. So clearly they’ve got to be a better risk for the bank and they they get these savings not after seven or 10 years payback period but immediately from when they first start writing your mortgage payment and their energy payments as they occupy the house.

[00:18:06.740] – Ksenia Petrichenko

what do you see as the key steps in this process to basically develop and implement green markets in any given country. Where to start. What are the bottlenecks. What what are the prerequisites and he key aspects to look at. In the beginning and during the implementation phase.

[00:18:33.810] – Steven Borncamp

Sure, I think that the key ingredients that we talked about the stakeholders before but if you can find a residential developer who is building quality and this this doesn’t have to be a luxury home it could be anywhere from affordable housing to mid price to luxury housing. But to find someone who wants to do something better I always tell people about my feeling is a builder and build quality then even if they’re not building green they can usually give green light is that the quality is the hard part. Teach him the hard part to really evolve towards but so you have that stakeholder is or is a builder willing to do something better. A bank that’s open to the concept that that we can basically say if you can they make available a financial product that connects this ring performance of the home with a special financial product. You need a certification body and in our case there is. We do this locally with Romania Green Building Council but it can also be can also use other very respected and useful tools like LEED or BREEAM so this can be done let’s say with an international scheme. We also have the energy performance system which for European Union countries is mandatory and it’s starting to be adopted outside of the European Union and we use this basically to measure the energy and so I think you you need that sort of certification element to be able in a country to be able to then decide what is green. We have to we have to earmark these remortgage products for green project. Therefore we need to sort of I think those are the three essential elements. Another nice to have is then start to bring in the industry. Those solution providers who are really have the the materials the technology provide the services really build rebuilding because they’re not only of course can they help provide the solutions themselves but very importantly they can train their people to do better promote green approaches on this project and they can spend their advertising budget they can start to educate the building industry but also citizens. What are the benefit of these green solutions and in the projects they support. I think if you have all of those elements it’s really then just a series of agreements all.

[00:21:15.620] – Ksenia Petrichenko

Thanks Steven. I think it was a great articulation of the key steps and amazing tapes out to anyone who wants to work on green mortgage and green home programs and definitely it makes very clear how important the role of facilitator of some sort of institutional organization can help to bring all stakeholders together and really as you said deliver the message and the ambition of what green home is and make sure that we are not locking in any potential energy savings which are not true lives because we are going to be with some suboptimal solutions rather than with more sustainable solutions which are already available and cost effective on the market. Steven you mentioned the SMARTER project and I personally find it very fascinating an interesting project on green homes and green mortgages and we at the Copenhagen Centre really thrilled to be part of it as well. Part of the consortium but for our audience. Would you mind saying a few words I’m giving away a little bit more details on what the project is about what they expect its results and what we’re actually trying to do they are together with many other partners.

[00:22:41.440] – Steven Borncamp


[00:22:42.190] – Steven Borncamp

I think the the the idea came from talking with a lot of our partners in main a lot of green building council that we had worked with prior around Europe and then also some other expert organizations institutions such as the Copenhagen Center. I think hearing the work. You’ve been doing and you’re trying to find and getting a sense that that time is right to really implement green mortgage program done rightly and in a lot of a lot of countries. So this this led us to initiate a an application to the European Commission to the Horizon 2020 program. And we gathered 17 organizations many green building councils but also energy agencies different some academia the university library. So for example of course the Copenhagen Center as as I mentioned and really bring together all of this expertise and to roll this out in a very wide scale. And we mentioned the it’s 11 countries that will be implementing new green mortgage programs. But interestingly we calculated the number of citizens in those countries and it’s just over 300 million people. So it’s it’s should have a big impact. But of course even 300 million is not such a big impact in a global scale. So we want to also at the conclusion of the project really be able to expand this beyond. So what the project entails is basically taking the rules that we already have developed here with the remaining Green Building Council program but also use some of the other existing tools so for example the Irish Green Building Council and Green Building Council Italia the Czech Green Building Council have all done a lot of work on their own certification system. We want to kind of get everybody together what tools that we have and fill in any gap and learn from each other really really create a very strong program before we start replicate. But soon after we will start talking to banks to developers solution providers in these eleven new countries to start identifying qualifying projects connect them sign up banks start offering product really really expand. There is a big part of dissemination and helping others after this. So I think that will be a really beneficial part of it. And also important is the quality assurance. How how do we maintain the integrity and the ambition of certifying these green homes and ensuring that only properly qualified homes belong under the green finance framework. That’s that’s I think a big part and we intend to do that not not by our point or or maybe white papers but really demonstrating on the ground project of successful very green project where the developer and investor is happy the banks are very happy about it. Lucian providers had opportunities from this and most importantly the citizens the people living in those homes really realized this was a great idea and the word of mouth start to happen. So definitely the smarter project is a big part of that. I would say anyone who’s interested to follow along we’re just now getting started with the international project. But there’s got to be a lot more details posted with with that of course the Copenhagen Center and under the smarter finance family web platform.

[00:26:42.620] – Ksenia Petrichenko

Yes great. Thanks Steven for introducing the project. We are going to have host an off the platform for this project as part of our knowledge management system at the Copenhagen Center on Energy Efficiency. So we will make sure that we also provide the link to that where in the starting phase but it will be a growing platform with a lot of information and a lot of tools. So for anyone interested it’s a very good idea to stay tuned for upcoming products from this fascinating project. I think we have discussed a number of very interesting aspects of green homes and green mortgages and thank you so much Steven for sharing all your experiences and insights. So it’s it’s great to have you here talking about that today. I don’t know if you have any closing remarks or any piece of advice for anyone or is researching this topic or trying to set up a green mortgage program in their countries. Please the floor is yours to say a few words at the end of this episode.

[00:27:57.750] – Steven Borncamp

Well first of all I just wanted to do myself say thank you for the opportunity to talk for not only myself but also on behalf of all my colleagues that are working on this project and I think we’re really optimistic that that this is not only going to be a local success but with all of these great partners for the new SMARTER finance for Families Project that will have really a great chance to to create not only environmentally successful but financially successful and sustainable programs in a lot of countries. So I think this is I think one of one of my key points I’d like to make and also to invite everyone to follow the progress it is is very much about creating a global initiatives and but we’re doing a really really great job at creating a model but then replicating that as we as we all know that we have to do. So I would just say again thanks for the opportunity. And definitely follow the SMARTER finance for Families Project through the Copenhagen Center’s knowledge management system and there is going to be a lot more to come.

[00:29:04.710] – Ksenia Petrichenko

Thank you Steven again so much. And it was a great discussion. And thank you for your time and all your ideas and insights. And thank you of course for all our listeners who are listening to this episode. All our episodes of this podcast will be uploaded at the Copenhagen center’s web site at And we’ll have more episodes coming on different topics related to Scaling up energy efficiency” in the future. So stay tuned for new episodes and goodbye from sunny Copenhagen.

[00:29:49.540] – Aristeidis Tsakiris

Thanks for listening to the podcast. Derisking investment into green buildings with Ksenia Petrichenko and Steven Borncamp. If you like our show please share it on your social network. And if you want to know more about today’s topic check our webpage Stay tuned and subscribe to receive notifications about our next podcast. See you at the next episode. And do not forget energy efficiency is a journey not a destination. Cheers.

SMARTER project

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Steven Borncamp

Project Director, SMARTER Finance for Families at Romania Green Building Council