Construction with green finance helps against climate change

Financing energy-efficient construction and renovation is one way for the financial sector to combat climate change. Housing is by no means a small source of emissions: buildings produce more than one third of Finland’s greenhouse gas emissions. The energy certificates of detached houses should be made available to banks in order to further improve energy efficiency.

The EU’s sustainable finance action plan includes three goals for the financial sector: it must operate on a long-term basis, steer funding towards environmentally sustainable business models, and implement this change in a controlled manner.

One aspect of sustainable finance is improving the energy-efficiency of buildings. This is discussed comprehensively in the Finnish government’s budget. The financial sector has a key role in this type of sustainability.

Ninety per cent of Finland’s residential buildings are detached houses of one or two households. The energy certificates of these buildings are not public and not available to banks in an electronic format. Finance Finland (FFI) has proposed that the certificates should be made available to banks in order to improve the loan granting process. This requires a legislative change, so FFI has taken the proposal to Krista Mikkonen, Finland’s Minister of the Environment and Climate Change.

If a constructor or renovator could obtain a cheaper loan based on the energy certificate, it could make energy-efficient construction more profitable and therefore more attractive.

Energy efficiency reduces living expenses

In addition to being environmentally friendly, energy efficiency reduces living expenses, giving households more financial leeway. Studies have shown that energy-efficient living comes with a smaller risk of payment defaults by the client.

In a public opinion survey conducted by the FFI earlier this year, nearly 60% of the respondents would be prepared to renovate their homes with energy-efficient upgrades if their home loan margin was reduced in return. Among the respondents aged 18 to 40, as many as 70% were in favour. In general, new homes already are energy efficient, but older homes can also be made energy efficient through renovations.