EU Horizon 2020

PRUDENTIAL TREATMENT OF GREEN MORTGAGES: SUMMARY AND RECOMMENDATIONS

The transition to a carbon-neutral economy entails massive investments in construction, technology and new infrastructure and the European Commission estimates that investments of around EUR 180 bn per year are required during the coming decade which can only be realised with a strong involvement of financial institutions.

Concretely, Copenhagen Economics (CE) estimates that around 50% of all the investment needed the next decade could be credit-financed (based on numbers from Denmark1). This corresponds to EUR 90 bn per year in Europe. Thus, over the coming decades, a massive amount of credit is likely to flow into investments which – one way or the other – support the green transition.

Copenhagen Economics has been tasked to analyse the question of  the question of how these "green assets" should be regulated from a prudential perspective in relation to energy efficient mortgages (EEM), i.e. mortgage credit to energy efficient building and energy renovations. Our hope is that these results and recommendations will not only guide the debate on green mortgages but can provide general guidance on the prudential regulation of green assets.

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