Green mortgage lending requires access to energy certificates – FFI proposes legislative change to Ministry of the Environment

The energy certificates of detached and semi-detached houses are currently not electronically available to banks. This slows down green development in mortgage lending. Better availability of the certificates would encourage energy-efficient construction and renovation of apartments, which in turn would help curb climate change.

Housing is by no means a small source of emissions: buildings produce more than a third of Finland’s entire volume of greenhouse gases. Ninety per cent of Finland’s residential buildings are either detached or semi-detached houses.

The Housing Finance and Development Centre of Finland ARA maintains a register of energy certificates, but the certificates of detached and semi-detached houses are not public information or available electronically to banks.

Finance Finland (FFI) has proposed to Minister of the Environment and Climate Change Krista Mikkonen that mortgage lenders should have access to energy certificates for purposes of the lending process. Enabling this access requires a legislative amendment.

“Energy certificates are a standardised source of information on a building’s energy performance. Without this information, green mortgages cannot be granted”, says Ingalill Aspholm, head of banking prudential regulation at FFI.

“The financial sector has a significant role in solutions that support climate change mitigation. Having access to energy information would help the sector respond to this challenge”, Aspholm points out.

The environment and loan customer both benefit

High energy efficiency decreases living expenses. This leaves the household more money to spend and more financial leeway in general. According to a recent study, energy-efficient housing thus involves a smaller risk of the customer’s insolvency.

“Lenders need information on the energy-efficiency of the collateral so that they can issue mortgage-backed green bonds. These bonds are then used to finance lending”, says Aspholm.

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 with renovation measures.