A long-term budget to deliver future-proof buildings

The upcoming Multiannual Financial Framework (MFF) will be the financial backbone of Europe’s energy transition. Efficient financing is critical to transforming the EU’s building stock and achieving the goals of the Energy Performance of Buildings Directive (EPBD) and the Energy Efficiency Directive (EED).

A well-designed financing system will cut energy bills, create local jobs, and enhance the EU’s competitiveness — all while reducing our dependence on energy imports. The Renovate Europe Campaign, of which Efficient Buildings Europe is a partner, calls for a simpler, larger, and more accessible EU budget and new tools to unlock private finance.

From local authorities to homeowners, smart and accessible funding must become a pillar of Europe’s Renovation Wave.

Key priorities to finance the energy transition of the EU building stock:

Dedicate increased EU funding to deliver efficient buildings
Unlock private finance for energy renovations
Simplify the EU’s energy efficiency budget lines
Improve the absorption rate of EU funds

EU Taxonomy

The EU Taxonomy is a vital tool for directing private finance into energy renovations and the construction of efficient buildings. As we move forward, the Energy Performance of Buildings Directive (EPBD) must be the central legislative framework for buildings in the EU Taxonomy — across construction, renovation, and ownership and acquisition. The EPBD has long been the cornerstone of Europe’s efforts to enhance energy efficiency and sustainability in the built environment. Maintaining the EPBD as the primary reference point within the Taxonomy is essential to avoid unnecessary complexity and confusion, particularly as stakeholders across sectors seek clarity and alignment with existing EU legislation. By keeping the EPBD at the forefront of the Taxonomy’s criteria for buildings, we can ensure consistency, facilitate compliance, and promote the achievement of ambitious environmental goals.

Public Procurement

Public procurement is a powerful tool to drive more efficiency in buildings but current EU rules fall short of supporting the energy efficiency goals set by the Green Deal and the revised EPBD and EED. Today, the majority of contracts are still awarded based solely on the lowest price, discouraging sustainable investments. Instead, public procurement rules should prioritise life-cycle costing and energy performance criteria. Public procurement rules are also a great way to increase digitalisation in construction and renovation, boosting productivity in the sector.

New instruments to stimulate private investments

Mortgage Portfolio Standard (MPS)

The 2024 EPBD introduced a definition of Mortgage Portfolio Standard — a new mechanism that encourages financial institutions to increase the median energy performance of their mortgage portfolio.

MPS is a tool with considerable potential as it can funnel more capital into energy-efficient renovations and boost the energy renovation rate. At the same time, MPS can help retail lenders to align their portfolios with Taxonomy-compliant activities and fulfil their Green Asset Ratio, as well as managing the climate transition risks they face in their mortgage portfolio.

Several banks such as ING, SEB or BNP Paribas have already developed their own Mortgage Portfolio Standard programmes. The European Banking Authority has also supported this concept, explaining that this would help to de-risk portfolios and improve
the resilience of the banking sector.

European Renovation Loan

European residential buildings are estimated to be worth €17 trillion and house 220 million homeowners. There are around €7 trillion of mortgages in Europe, and therefore there is €10 trillion of home equity against which owners could borrow for the deep renovation and transformation which most of these buildings require by 2050. These savings must be unlocked efficiently, and an ‘EU Renovation Loan’ could play this role.

To make European housing affordable and sustainable, the EU must deliver on its commitments to provide financing options to vulnerable homeowners for whom energy costs are unsustainable. In this regard, EU financing tools should be used to deliver low-cost, long-term financing options to homeowners, together with the EIB and EU budgetary support.

EU Renovation Loans can be offered to underserved families and backed by an EU guaranteee. InvestEU provides an EU guarantee to four existing “policy windows” whose deployment is supported by the EIB group. A fifth “policy window” is needed for building renovations.

Read more on the website of Climate Strategy & Partners (a Renovate Europe partner).

Engagement with the European Energy Efficiency Financing Coalition

The European Commission and Member States have launched the European Energy Efficiency Financing Coalition. It aims to create a favourable market environment for energy efficiency investments and to scale up the private funding needed in energy efficiency. It will work towards facilitating the implementation of energy efficiency financial instruments and schemes under EU funding programmes and promoting these programmes to facilitate further private investment in energy efficiency projects.