Business briefing on Energy Efficient Mortgages with Luca Bertalot, Secretary-general, European Mortgage Federation – European Covered Bond Council (EMF-ECBC), organised by the Irish Green Building Council as part of Ireland's National Renovation Strategy Consultation Process - Build Upon project.

1. Recommendation 4:
Enabling Financial Tools &
Mobilising Private Funds
Dublin - 24th November 2016

2. Pat Barry
CEO – IGBC
#BuildUpon

4. From blueprint to build, the Home Performance Index
represents a first in Irish residential development
certification. For developers and buyers the HPI is a
trusted seal of assurance based on crucial indicators,
because both makers and takers need to know that
their house is a home.

5. National scheme
operator
For the investor
One simple label backed by over 30
verifiable technical indicators
Risk assigned to correct level in chain of
supply
Works seamlessly with Irish Building control
and planning system
Mitigates risk across a range of indicators
from location to build quality

6. National scheme
operator
Communicate with the home buyer

7. National scheme
operator
Different levels of certification award

8. Co-Creating Ireland’s National
Renovation Strategy V.2
Marion Jammet, Business
Development Manager, IGBC
#BuildUpon

9. 1. National Renovation Strategies
#BuildUpon
2. The Consultation Process
3. Mobilising private funds

10. #BuildUpon

11. #BuildUpon

12. #BuildUpon
Low interest loans (green loans)
Building Performance Leases
Mobilising private funds in the non-
residential sector (ESCOs model, etc.)

13. #BuildUpon

14. Michael Hanratty
MD – IHER Energy Services
#BuildUpon

15. The ENERFUND project
«An ENERgy Retrofit FUNDing rating tool»
Facilitating Energy Efficiency Investments
24 November 2016, Dublin
This project has received funding from the European Union’s Horizon 2020 programme
under Grant Agreement No 695873
Michael Hanratty, Energy Action Ltd.

16. 16
Public
Awareness
& Trust
Trustworthy
Retrofit
Opportunities
Funding
Schemes
& Incentives
Deep
Renovation
Problem Identified
There are gaps that must be addressed to enable
deep renovation of buildings

17. 17
Project Introduction – Overall goal
The ENERFUND tool will rate and score deep renovation opportunities – like a credit
score used by banks to rate clients.
The tool will include parameters such as:
•BER/ DEC data
•number of certified installers, government grant schemes etc.
By providing a rating tool for deep renovation opportunities – both private and public
buildings –
• funding institutes can provide targeted loans,
• retrofit companies can identify sound opportunities,
• municipalities can promote targeted incentives and the
• public's trust for retrofitting will be enhanced.
ENERFUND will focus on retrofit of apartment buildings,
commercial buildings and public buildings

18. 18
Project Partners- 12 countries
NO ORGANISATION COUNTRY
1 Cyprus University of Technology Cyprus
2
Centre for Renewable Energy Sources and
Saving
Greece
3
National Institute for Research and
Development in Construction, Urban Planning
and Sustainable Spatial Development
Romania
4 Cyprus Energy Agency Cyprus
5 ECB – Energy Centre Bratislava Slovakia
6 Severn Wye Energy Agency UK
7 Sustainable Energy Development Agency Bulgaria
8 Jozef Stefan Institute Slovenia
9 Aalborg University Denmark
10 Valencia Institute of Building Spain
11 SERA energy & resources e.U Austria
12 Energy Action Ltd Ireland
13 ENERMAP Ltd Cyprus
14 Energies 2050 France
15
Ministry of Regional Development and Public
Administration
Romania

19. 19
INDICATIVE PARAMETERS – TO BE DEFINED DURING THE PROJECT
OK Credit Rating Good Credit Rating OK Credit Rating
“E” Building “F” Building “G” Building
High Occupancy Medium Occupancy Low Occupancy
5% VAT on retrofit 19% VAT on retrofit 0% VAT on retrofit
Mountainous Area City Area City Area
No pro-active actions Pro-active Mayor Pro-active Mayor
No Training Courses Available Training Courses Available Training Courses Available
Product Certification Scheme Product Certification Scheme No Product Certification Scheme
An ENERFUND example

20. 20
INDICATIVE PARAMETERS – TO BE DEFINED DURING THE PROJECT
OK Credit Rating Good Credit Rating OK Credit Rating
“E” Building “F” Building “G” Building
High Occupancy Medium Occupancy Low Occupancy
5% VAT on retrofit 19% VAT on retrofit 0% VAT on retrofit
Mountainous Area City Area City Area
No pro-active actions Pro-active Mayor Pro-active Mayor
No Training Courses Available Training Courses Available Training Courses Available
Product Certification Scheme Product Certification Scheme No Product Certification Scheme
An ENERFUND example

21. 21
EPISCOPE Mapping Tool for Northside of Dublin (Residential)
40,000 plus BERs aggregated to Small Area level
http://energyaction-static.s3-website-eu-west-1.amazonaws.com/index.html

22. 22
Wall U Values
Current status indicator!

23. 23
Primary Heating Types

24. 24
Primary Heating Efficiency

25. 25
Heating Controls

26. 26
Overlaying & Filtering multiple datasets

27. 27
Fuel Poverty Map
Fuel Poverty Indicator is based on BER rating of E1, E2, F or
G and a Deprivation score of 8,9 or 10.

28. 28
www.mapdwell.com Rooftop Solar PV Calculator

29. 29
Now at the Consultation Stage for design of
the ENERFUND tool
• Questionnaires in all 12 countries to:
• Energy Suppliers / Energy Service Companies
• Banks, investment companies
• Property Managers
• What information/ datasets would you recommend us
to include in ENERFUND tool? – to drive more retrofit
activity and more financial investment
• We hope you can inspire us with your ideas!

30. Disclaimer:
The sole responsibility for the content of this publication lies with the authors. It does not necessarily reflect the opinion of the
European Union. Neither the EASME nor the European Commission are responsible for any use that may be made of the
information contained therein.
For any questions:
Contact Person: Michael Hanratty(michael@iher.ie)
IHER Energy Services/ Energy Action Ltd.
Project Details:
Website: www.enerfund.eu
Twitter: @enerfund
Facebook: /enerfund
Thank you for your attention

31. ROAD MAP FOR AN
ENERGY EFFICIENT (EE) MORTGAGE
INITIATIVE
Dublin
24 November 2016

32. 2
WHY A PAN-EUROPEAN APPROACH?
 Buildings are responsible for 40% of EU energy consumption
 Buildings are responsible for 36% of CO2 emissions in the EU
 75-90% of EU building stock is predicted to remain standing in
2050
 Improving EE of buildings could reduce EU energy consumption
by 5%-6% and CO2 emissions by 5%
 EU has set itself an overall 20% energy savings target by 2020
and is now considering increasing this to a 30% target by 2030
 Scale of investment needed to meet the 2020 target is estimated
at €100 billion per year – European Commission has underlined
need for private investment

33. 33
OBJECTIVE & UNDERLYING BUSINESSES CASE
Increased
loss
mitigation
capacity
Enhanced
LTV via
green
value
Lower
probability
of default
Reduced
capital
charges
The ultimate objective is a pan-European private bank financing
mechanism, based on a standardised approach, to encourage energy
efficient improvement by households of the EU’s housing stock by way
of financial incentives linked to the mortgage, and in this way support
the EU in meeting its energy savings targets.
Underlying business case
Independent from, but complementary to, public funds or tax incentives

34. 34
ENVIRONMENTAL IMPACT OF HOUSING IN THE EU
EU Total Emission Fuel Combustion in 2012: 3495.2 Mt**
Source: Eurostat
Industry, 25%
Transport, 32%
Households, 27%
(295.9)
Services,
14%
Agriculture and
Fishing, 2% Other, 0%
Breakdown Energy Consumption in the EU
in 2013 (MTOE*)
EU Total in 2013: 1103.8 Mtoe*
Source: Eurostat
Energy Industries,
40%
Manufacturing
Industries and
Construction,15%
Transport, 25%
Residential, 12%
(410.4, )
Breakdown of CO2 Emissions in the EU Fuel
Combustion Activities in 2012 (MT** of CO2)
*million tons of oil equivalent: a unit of energy
defined as the amount of energy released by
burning a tonne of crude oil
**million tons

35. 35
UNDERLYING MARKET CHARACTERISTICS IMPACTED BY
EE
Retrofitting impacts positively on property value
ensuring wealth conservation & loss mitigation
by preventing “brown discount”
EE leads to a reduction in the impact of
energy costs to income, reducing borrowers‘
probability of default

36. 36
UNDERLYING INCENTIVE CHAIN
Borrowers:
 Preferential interest rate and/or addition retrofitting funds
 Increased property value due to retrofitting, ensuring wealth conservation
 Lower running costs of the building
Lenders:
 Energy savings result in a lower PD due to increased disposable income
 Increased risk mitigation capacity as increase in property value reduces LGD
 Lower capital requirements for energy efficient mortgages
 Protection of loan portfolio against brown discount
Investors:
 Response to increasing investor demand for investments with sustainable aspect
 Diversification of investor portfolio & protection against brown discount
 Incentivises segregation of existing green assets
 Increased risk management in terms of credit, asset & performance risk
SMEs:
 Additional funds provide a flow of capital into the real economy
 Supports SMEs activity in the retrofitting sector

37. 37
FURTHER ASPECTS
Valuation Profession:
 EE is strong potential value driver & risk factor and integration of EE in valuations &
credit risk assessment could transform current lending practices
 Whilst conventional market-based valuation methods are fit to account for EE
features in valuations, there is limited quality rental & sales evidence to allow valuers
to accurately determine incremental value impact
 Initiative could be help to overcome this by building up evidence base and explicitly
instructing banks and valuers to request, collect & make use of additional data
Consumer Behaviour:
 Initiative can also influence consumer behaviour by encouraging good energy
behaviour, thus reducing energy consumption (energy bills)
 Academic literature demonstrates potential for energy savings of up to 20% via
targeted behaviour
Better Risk Management:
 Lower Credit Risk: Due to reduced PD and LGD
 Lower Asset Risk: Due to “green value” and protection against “brown discount”
 Lower Performance Risk: Due to robust assessment of EE improvement ensuring
lower energy consumption and ”green value”

38. 38
METHODOLOGY - FINANCING MECHANISM
 Key challenge: to incentivise energy efficient investment in existing dwellings, which
constitute bulk of EU housing stock
 Based on a set of EE indicators, lenders could offer:
 New Builds: Discount in interest rate for new builds with energy rating A+/A or B;
 Existing property: Discount in interest rate according to improvement in energy
rating of property between D and A/A+
A A+
Energy Efficient Mortgage
x%
H G F E C B
x%-∆ 𝐶 x%-∆ 𝐵
x%-∆ 𝐴+
x%-∆ 𝐴
x%: mortgage interest rate
EE delta: ∆ 𝐴+> ∆ 𝐴> ∆ 𝐵> ∆ 𝐶
Conventional Mortgage
D
Existing property D -> A+
x%-∆ 𝐷
New build B -> A+

39. 39
METHODOLOGY - ENERGY EFFICIENCY INDICATORS
EU standard: Delta in
Energy Performance
Certification
Consumption
Indicator: Delta in
Energy Bill/Occupants
Demand Indicator*
*One possibility: The EE Directive (2012/27/EU ) foresees an ‘energy performance contracting’ which is a contractual arrangement
between the beneficiary and the provider of an EE improvement measure, verified and monitored during the whole term of the contract,
where investments (work, supply or service) in that measure are paid for in relation to a contractually agreed level of EE improvement or
other agreed energy performance criterion, such as financial savings.
Three pillar approach to certification of actual energy performance:
The metrics and value will bring the mortgage industry in-line with the EU on energy

40. 40
IT Data warehouse Platform
• Mortgage data line by line
• EE data levels unit by unit
• Funding instruments adopted
• Enhance asset liabilities management
• Increase market transparency
METHODOLOGY - DATA WAREHOUSE
 At the heart of Initiative is a comprehensive “dataset” on actual financial
performance of existing mortgages according to their energy rating.
 Data gathered will be processed and analysed in order to understand the impact
of EE on borrowers’ PD and on LGD.
 Results of the analysis will be made available to the public free of charge.
 Longer-term intention is to compile this extensive dataset in a common &
central “data warehouse” to clearly register and record link between property,
energy rating & loan performance, so that these assets can be identified for
“green” funding purposes, for example.

41. 41
Energy Efficient passport for buildings
• For building owners
• Recognised throughout the EU
• Value and clarity of the improvements installed in the building
• Non-performing loans mitigation
• Improving market transparency
METHODOLOGY – BUILDING ENERGY PASSPORT
 An EE building passport could propose a tailor-made, ready to implement action
plan to the building owner, based on an affordable audit
 It could include tailor-made improvement recommendations and therefore act
as an important communication instrument for EE mortgage product itself
 It would be meant as a holistic tool covering all aspects of buildings
 It would accompany the building over its life time
 The passport would ensure that energy improvement considerations are well
integrated each time works are undertaken in a building
 Having a passport would be a prerequisite to obtain an energy efficient
mortgage

42. European Mortgage Federation
European Covered Bond Council
Rue de la Science 14A, 2nd Floor - B-1040 Brussels - Belgium
www.hypo.org emfinfo@hypo.org ecbcinfo@hypo.org
@EMF_ECBC EMF-ECBC

43. Next Steps
Tuesday, 29th November: Upskilling of the Construction industry 2
Thursday, 1st December: Setting the Right Standards
Tuesday, 6th December: Financial Incentives - Tax & Grants
Tuesday, 13th December: Public Procurement Rules and Deep Renovation
#BuildUpon

44. Recommendation 4:
Enabling Financial Tools &
Mobilising Private Funds
Dublin - 24th November 2016