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Driving the market for green mortgages in the Netherlands

28 October 2022

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A new focus on transparency, consistency and compliance will make energy-efficient, green mortgages a more attractive option for Dutch investors. Learn more from our experts on the ground Arno Vink, executive director, capital markets, Diederik de Jonge, commercial executive, and Kwint Linzel, senior financial account manager

The EU aims to become carbon-neutral by 2050 and has committed to a 32% reduction in primary energy consumption by the end of the current decade.

It is an ambitious plan – and one that faces a significant obstacle in the form of Europe’s ageing building stock. Regulators hope that a new focus on energy-efficient, green mortgages will help.

The building sector is one of the main producers of CO2 emissions. The EU estimates that around 75% of the continent’s buildings are energy inefficient, usually because they were built before stricter environmental standards came into force at the start of the last decade.

With that in mind, the continent faces a thorny financial problem as it wrestles with the practicalities of meeting sustainability targets.

There is no doubt that Europe needs new housing stock. At the same time, only 1% of European properties currently undergo energy-efficient renovation every year. The EU aims to at least double that figure over the next decade.

To that end, the EU calculates that meeting the energy-saving targets laid out in the Green Deal will cost something like EUR180bn every year, most of which will have to be targeted at energy efficiency in buildings.

Financing green mortgages and renovations

So where will this level of investment come from? The simple answer is that much of it will have to be generated by the market – which is where an initiative called the Energy Efficient Mortgage Label (EEML) comes in.

The development of energy-efficient green mortgage products is not a new idea. For a number of years, the financial services sector has been offering green mortgages that funnel capital market funds into sustainable developments and renovations.

But so far they have had limited effect. According to Fitch, green mortgages are still a niche product in Europe, and tend to be attractive only to more affluent buyers purchasing new energy-efficient properties.

For the EU to meet its targets, there is a clear need for the development of a wider portfolio of mortgage products to cover standard housing stock as well as energy-efficient renovations to older properties. That, in turn, requires the confidence of both investors and consumers.

The Energy Efficient Mortgages Initiative

The EU responded to this with the launch in February 2021 of the Energy Efficient Mortgages Initiative (EEMI), which aims to stimulate the mortgage industry to fund more green building and renovation, and create a standardised reporting template for the sector.

According to the EU, the EEML will provide “a clear and transparent quality label for consumers, lenders and investors, aimed at identifying energy-efficient mortgages in lending institutions’ portfolios”.

Promoting an efficient building strategy for the Dutch energy market

In early November 2021, a group led by stakeholders in the Dutch residential housing and mortgage market announced the formation of the Energy Efficient Mortgages NL Hub (EEM NL Hub).

So far, Intertrust Group is the only corporate service provider to join the full member list.

The purpose of the hub is to act as the local knowledge centre for Dutch energy-efficient mortgages, translating Europe-wide regulation such as the EU Taxonomy for the Dutch market.

It will also help push forward EEML in a Dutch context. Indeed, the EEM NL Hub has a seat on the European EEML Committee, giving the Dutch market a significant say in the wider development of the label.

This activity is a necessary step for the country’s energy-efficient mortgage market because it will bring confidence and certainty to investors. Ultimately, the aim of the EEMI in the Netherlands, as elsewhere, is to create a standardised framework against which sustainable mortgage financing can be consistently measured and reported.

Three pillars of green mortgages

It is not there yet, but progress is being made and the work of the newly formed EEM NL Hub now centres around three pillars that align with the aims of the EEML.

  • The framework: Establish a Dutch framework for energy-efficient mortgages that is transparent, actionable and compliant.
  • Data and disclosure: Collect and make available all relevant sustainability data, enabling consistent disclosure and reporting.
  • Representation and alignment: Represent stakeholders nationally and internationally, and align with other organisations.

Developing the market for green mortgages

The establishment of the EEM NL Hub has come at just the right time. We know from experience that investors are looking for greener transactions, conscious of the need to meet tougher ESG requirements and EU regulations.

Being part of the EEM NL Hub allows us to help shape the future of the green mortgage market. The application of consistency and transparency promised by the hub and EEML will make energy-efficient mortgages an increasingly attractive option for both investors and consumers in the Netherlands.

A firm step towards consistency and transparency has been set by establishing the first version of the Dutch Energy Efficient Mortgage Framework (DEEMF). This document describes in detail the application of the EU Taxonomy to Dutch residential mortgages. The Framework consists of two documents:

Why Intertrust Group?

  • We understand that energy-efficient investments are an essential part of meeting national and international sustainability targets
  • The EU Taxonomy is a package of measures designed to direct financial flows towards sustainable activities
  • We provide end-to-end data solutions specifically designed to manage ESG data for illiquid assets
  • Our expert guidance allows clients to compare and contrast competing energy-efficient mortgage investments