Green Mortgages & Green Renovation Loans: A Toolkit for Financial Institutions (EN)

Supporting the creation of Green Homes through a credible, cost-effective certification program represents an opportunity for residential investors & developers to differentiate the quality and environmental performance of their construction projects while educating consumers about the financial and wellness benefits. Financial institutions – through the issuance of Green Mortgages tied to certified Green Homes – can significantly reduce their mortgage default risk and raise the asset valuation of homes they finance in order to offer a lower cost of financing. Lower financing costs provides the homebuyer with greater purchasing power to invest in improved construction quality. As the Green Mortgage accurately values the significant reduction in energy, repair and health costs of those who purchase Green Homes. Green Mortgages also help the Romanian marketplace better evaluate the positive value of sensible borrowing to invest properly at the beginning of the building process. This initiative creates a consortium between a bank, an investor/developer, a home buyer and a certifier to certify green residential projects that are environmentally-responsible and energy efficient relative to the standard offer in Romania generating financial social and environmental benefit. Increased energy savings and other financial benefits (such as improved occupant health and less frequent/ lower home repair costs) substantially reduce the mortgage default risk allowing the lender to lower the monthly interest rate while maintaining profit margins. This enables the home buyer to invest into a more energy efficient and greener home while lowering their total monthly cost of ownership.

The project is strongly supported by the European Commission’s Directorate General Energy (DG Energy). It is also on the forefront of aligning the green home certifications with the Directorate General Environment’s (DG Environment’s) Level(s) framework to include embodied carbon/ Life-cycle Assessment and success towards a Circular Economy. The project is being implemented by Green Building Councils and National Energy Agencies and is supported by leading academic institutions including the Université Libre de Bruxelles and the Copenhagen Centre on Energy Efficiency; A partnership of the United Nations Environment Program and Danish Technical University.

The introduction of such a financial product is very timely in the context of the current and impending European Directives that require progress toward Net Zero Energy Buildings, significantly reduced construction waste, and reduced toxicity of building materials compulsory for all new and existing residential buildings. Growing energy security concerns and rising energy costs reward residential projects that require less costly and naturally scarce resources to build and operate. By contributing to the creation of certified Green Homes, residential investors and developers can greatly facilitate a rapid and profitable transformation of the construction and real estate industry towards a low carbon/green economy.