GREEN MORTGAGES
Executive Education: Sustainable Finance – Green & Climate Finance, 5th Edition
May 2023
Contents Introduction 3-4 Case Study 5-6 Green Mortgages 7-8 Team Contacts 9 References 10 Pages
Introduction (1 of 2)
Buildings are the largest energy consumer in Europe
• 40% of EU energy consumption
• 36% of energy-related greenhouse gas emissions
• 35% of the buildings in the EU are 50+ years old, and 75% considered energy inefficient, with only 1% renovated each year
Better and more energy efficient buildings will improve the quality of citizens’ lives and alleviate energy poverty while bringing additional benefits, such as health and better indoor comfort levels, and green jobs
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Introduction (2 of 2)
The Green Mortgage aims to align with the efforts put forth by the UN General Assembly in the 17 Global Sustainability Development Goals
In offering a product that:
7 SDGs are aligned with the product
• Decreases emissions
• Saves energy
• Tackles energy poverty
• Facilitates renovation
• Improves quality of life
• Generates jobs and growth
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Case Study – Research
Fulfill a market gap and increase product offering and innovation
• Only 4% of homes have been rated 'A+' in energy efficiency from 2014 to date. In addition, 2 out of 3 buildings are class 'C' or lower (Building Certification System):
To date, many green mortgage lenders offer homeowners discounted interest rates for buying properties that are already energy efficient, but this accounts for a tiny slice of the housing market
• In researching the current Portuguese market´s supply in green mortgage loan, the currently existing products essentially involve:
1. A reduction in the spread for houses acquired/built with energy certificate A+, A or B (from 0,05% to 0,2%);
2. A reduction in the interest rate of 0,1% (if it is fixed)
3. A contract commission discount, or full commission offer
• Consumer credits for investment in renewable energy, energy and water efficiency, and waste management exists with more favorable interest rate
• If aiming to improve the home efficiency, there is the possibility of applying to the Environmental Fund created by the government. It is mandatory to pay in advance for all the works done, and then wait for the eventual approval of the application and final reimbursement (after no less than 3 months and only a percentage of costs incurred)
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4% 13% 10% 7% 21% 23% 14% 8% A+ A B B- C D E F
Case Study – Survey
The National Institute of Statistics (INE) announced that, in 2022, 168k houses were sold in Portugal, the highest record ever, mobilizing 32 billion euros
• New houses mobilized 8 billion euros (24% of total), 18,2% more than in 2021; while the value for preowned houses rose 11,6% to 24 billion euros. Most sales are thus related to older houses that are less energy efficient
The demand for a Green Mortgage is real. Between Feb-May 2023, we gathered 36 informal survey responses
What’s most important on a home loan?
How often do you consider sustainability?
Is a sustainable home important to you?
With identical terms, would you prefer a bank with loan sustainability criteria?
6 94% 6% Yes No 81% 19% The best interest rate A personalized service 72% 25% 3% Frequently Sometimes Never 97% 3% Yes No
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Green Mortgages (1 of 2)
Green Mortgages can be an effective tool to improve the energy efficiency of homes and reduce CO2 emissions, helping homeowners to save money on energy bills and increase the value of their properties
Our project aims to present:
• A Green Mortgage that offers customers a discounted rate of interest when building/buying an energy efficient home
• A secured homeowner loan to finance improvements to the energy efficiency of an existing building
Payments in principal and interest over time
Property serves as collateral to secure the loan
Offered preferential terms for meeting environmental standards (i.e., lower interest rate)
Improvement in environmental performance and increased green value
Lower probability of default, reduced risk
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Conventional Green
Green Mortgages (2 of 2)
Product Offering Detail:
Product Mortgage House Loan (DL n.º 74-A/2017, june 23and DL n.º 349/98, november 11)
Amount Minimum: €5.000
Maximum: Permanent Home - Minor value between 90% of the total investment (as BdP regulation) and the percentage of the Bank Valuation stablished for the Normal Mortgage Loan (can go from 70% to 90% in the Portuguese Banks as we searched) + 5% more, used to enhance sustainable performance (renewable energies, energy/water efficiency, use of waste or others*
Interest Variable rate / Fixed rate / Mixed rate
Spread - 0,25% (25bp reduction) when presented the payment receipts for works done
Maturity Minimum: 1year
Maximum: 40years and age limite at term loan of 75years
Terms of use
Period of time in which retained capital is used for construction or improvement works
Maximum period: 24months for the adicional 5% loan: Capital is released as budgets are presented
Amortization plan Monthly payments, capital and interest.
Guarantees Specific Mortgage of the financed property
Other Services List of Partners with skills to develop de sustainable upgrade. Free advice and quotes. Technical follow up helping to choose more efficient materials and equipment and to reduce energy consumption
* Types of Eligible Projects: Replacement of Windows (class A+); Application or replacement of thermal insulation on roofs, walls, or floors, as well as replacement of entrance doors; Heating and/or cooling systems for the environment and/or water using renewable energies; Installation of Photovoltaic Panels; Interventions at water efficiency and incorporation of bioclimatic architecture solutions (e g shading, greenhouses and roofs or green walls)
Benefits:
• Savings: energy efficiency in buildings can reduce energy costs by up to 30%, improving the financial performance of the borrower and so reducing the credit risk (US Environmental Protection Agency)
• Value: properties with sustainable characteristics tend to be more valued, resulting in financial gains for the customer in the future. As for the Bank the Loan to Value ratio becomes more favorable. Homeowners who made energy efficiency improvements saw an average value increase of 14% (University of Cambridge). The Banks Green Asset Ratio can be improved
• Living Standards:
• There are at least 660k people in severe energy poverty in Portugal (Ministry of the Environment & Climate Action)
• By 2030, the aim is to reduce from 17% to 10% the percentage of Portuguese without money to heat their homes in winter (National Strategy to Combat Energy Poverty)
• The percentage of the population living in houses with problems of infiltration, humidity, rotten floors, walls, windows or roofs is expected to drop from 24% to 20% in 2030, 10% in 2040 and 5% by 2050 (Eurostat)
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Team Contacts
Courtney Lynn Koczka
https://www.linkedin.com/in/courtneykoczka +351 961 884 945
courtneykoczka@gmail.com
Daniela Benoliel
https://www.linkedin.com/in/daniela-benoliel-45971a8/ +351 916 945 349
benoliel.daniela@gmail.com
Cristiana Catarino
https://www.linkedin.com/in/cristiana-catarino-aa8079a +351 966 603 434
cristiana.catarino@cgd.pt
Luciano Biscaro Tuna
https://www.linkedin.com/in/lucianobtuna +351 961 882 917
luciano.b.tuna@gmail.com
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REFERENCES
https://worldgbc.org/article/what-are-green-mortgages-how-will-they-revolutionise-home-energy-efficiency https://www.greenfinanceinstitute.co.uk/programmes/ceeb/green-mortgages/ https://energy.ec.europa.eu/topics/energy-efficiency/energy-efficient-buildings/energy-performance-buildings-directive_en https://clientebancario.bportugal.pt/en/what-they-are-and-various-schemes https://www.iea.org/reports/technology-roadmap-energy-efficient-buildings-heating-and-cooling-equipment https://www.epa.gov/statelocalenergy/local-topics-energy-efficiency-non-governmental-buildings https://www.enterprise.cam.ac.uk/news/the-link-between-energy-efficiency-and-property-values https://www.publico.pt/2023/01/25/economia/noticia/ha-menos-660-mil-pessoas-pobreza-energetica-severa-2036247 https://www.idealista.pt/news/imobiliario/habitacao/2023/03/22/57221-venda-de-casas-em-portugal-atinge-recorde-em-2022-apesar-da-inflacao-em-atualizacao https://www.idealista.pt/news/imobiliario/habitacao/2022/01/11/50454-certificado-energetico-2-em-cada-3-edificios-tem-classe-c-ou-inferior
CONFIDENTIAL
information presented herein is for the purpose of the ISEG Sustainable
Edition,
content is subject to change.
This document must not be duplicated, shared, or printed without written consent of Courtney
Koczka, Cristiana Catarino, Daniela Benoliel, Luciano Biscaro Tuna.
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Finance:
Green
& Climate Finance 5th
final project. All
