EU built environment has the largest climate investment gap of any sector
Europe’s building sector is responsible for 40% of energy consumption, more energy than any other sector, and account for 36% of the EU’s energy-related GHG emissions. 97% of Europe’s buildings – as many as 215 million – will require some level of renovation before 2050. To meet the EU’s 2030 climate target, €3.5 trillion of total investment will be needed this decade to decarbonise Europe’s buildings through renovation. Based on Member States’ current plans, the investment gap to 2030 is estimated at €2.75 trillion. Public investment cannot close this gap alone. With pandemic recovery investments and climate at the top of the EU’s agenda, now is a unique opportunity and crucial moment to mobilise private finance and investment in renovation.
The Green Finance Institute today releases a paper, Unlocking the Trillions: Public-private innovation to deliver the EU’s renovation wave ambition, and, building on the success of its UK-based Coalition, launches a new initiative, the Coalition for the Energy Efficiency of Buildings Europe (CEEB Europe), which will bring together leaders in the finance, real estate and energy sectors, and across policy, academia and non-profit organisations, in each country of operation co-develop the innovative financial products that will address this investment gap. The paper highlights that a combination of finance market maturity, enabling environment, and policy ambition are the pillars upon which financial innovation stands and the landscape for these differs across Europe. The GFI will partner with like-minded national finance and real estate organisations across Europe to form coalitions, and collaborate with networks already in place, to share knowledge and best practice, catalyse product development, and advise on policy levers to create and scale markets for building renovation.
In July, the European Commission unveiled its ‘Fit for 55’ package of legislation to underpin a bloc-wide transition to climate neutrality; at its core are a series of proposals for buildings, supporting last year’s Renovation Wave Strategy which set out the urgency with which we must renovate and upgrade our building stock. The EU aims to double the renovation rate by 2030 and is supporting this with the EU’s Recovery and Resilience Facility; 37% of the investment available needs to flow toward climate mitigation projects, including building renovation. Yet outside this substantial funding commitment, the additional investment needed to meet the 55% target is still €275bn per year to 2030 – the largest climate investment shortfall of any sector.
At the end of October, 26 Member States had submitted their National Recovery and Resilience Plans. However, very few plans have set out to leverage public funds to crowd-in private finance to support investment or sustain longer-term renovation activity, relying mostly on grant programmes. The public capital made available during the current EU budget to 2027 creates a unique opportunity for a longer-term, larger-scale, greener finance market to be built. With the right supporting mechanisms and financial products in place, grant and loan funding provided to Member States can act as the vital catalyst for private finance to flow in. Increasing private investment in upgrading Europe’s building stock is essential for the longevity and momentum of the transition to carbon neutrality as well as its ultimate success. At the same time, there is an accelerating trend of net inflows of capital looking for net-zero aligned investments across Europe.
“While small compared to the scale of what is needed, Europe’s recovery budgets have the potential to kick-start the widescale greening of the building stock. However, to drive the necessary investment of over €3.5 trillion in renovation to 2030, a collective, outcomes-focused approach will be key. We’ve launched CEEB Europe to work in partnership with others to crowd-in private funding to this sector, by convening coalitions of property, finance, policy and supply chain experts to examine and develop the solutions to overcoming the barriers to investment,” – Dr Rhian-Mari Thomas OBE, Chief Executive, Green Finance Institute.
“At COP26 we heard renewed calls for the built environment to fully decarbonise. As this report notes, the investment gap to realise these ambitions is huge. The real gap is now one of collaboration – across the worlds of finance, buildings, policy and more – to align ambition, and establish the practical instruments that help millions of citizens and businesses bring their buildings up to climate-aligned standards. The CEEB model is leading the way here.” – James Drinkwater, Head of Built Environment, Laudes Foundation.
“Our network of Green Building Councils is working on tackling these systemic barriers and we welcome the contribution that this new CEEB report makes to this important task. By investing now, we can unlock the benefits of a high quality, high performance building stock and tackle the 36% of Europe’s carbon emissions, which buildings contribute. The alternative is many more stranded assets that take us closer to climate catastrophe. It’s time to get collaborating!” – Stephen Richardson, Director, Europe, World Green Building Council
The UK-based Green Finance Institute, the country’s principal forum for public and private sector collaboration in green finance, leads sector-expert coalitions to unlock barriers to decarbonisation funding. Launching the pan-European coalition, CEEB Europe, today, the Unlocking the Trillions report contains a unique comparative analysis of the financial and enabling factors present in each Member State. In partnership with independent climate think tank E3G and with funding from the Laudes Foundation, a new independent foundation responding to the dual crises of inequality and climate change by providing its partners with philanthropic capital, expertise and collaboration, CEEB Europe conducted a unique mapping exercise to identify high-potential countries with a mature financial landscape, enabling environment and ambitious built environment plans, looking at the renovation finance challenge for each country in the round. It also examined a selection of existing pioneer initiatives at local and EU levels that bring renovation finance actors together and create platforms for property owners to seek technical assistance and long term, affordable financing for their renovation projects.
As a next step, CEEB Europe will partner with key networks and players in the finance and real estate sectors of high-potential, high-ambition countries to join or set up in-country coalitions mirrored on the success of CEEB UK, the purpose-led innovation platform for renovation finance. These coalitions will work through the country-specific challenges and opportunities of widescale renovation of (in the first instance) housing.
“The public funding attached to Europe’s recovery plans can start the renovation wave, but it cannot sustain it. Therefore, these funds represent a key opportunity to develop innovative new policies and public finance solutions to crowd-in private capital. CEEB Europe exists to collaborate with actors in member state countries to unlock the financial, as well as data, regulatory and policy barriers to renovate their buildings, and to create new products and tools to accelerate private sector investment towards meeting the ambitions of the Renovation Wave. We want to partner with equally dynamic organisations in this space, to examine the challenges on a country-specific basis, and then design and bring to market the innovations to overcome them,” – James Hooton, Programme Director, CEEB Europe.
“Europe’s buildings face the largest investment shortfall of any sector for meeting the EU’s climate targets. Closing this gap will create green and local jobs, and deliver healthier, affordable to run homes and workplaces in every part of Europe. By focusing on the need to crowd in private finance and investment alongside recovery plans and get Europe’s renovation markets to deliver at the pace and scale needed, CEEB Europe is here to help to ensure the European Green Deal delivers for people.” – Pedro Guertler, Programme Leader, E3G.
“Although Europe has been significantly affected by the Covid-19 crisis, the recovery process ahead will be an opportunity to improve the energy efficiency of its buildings, reducing carbon emissions. Spain is aiming to improve the energy efficiency of 1.2 million homes between 2021 and 2030, which will require investment from the private sector. As this report suggests, a promising way of finding the required investment quickly will be joint action between the public and private sectors. To date, the Center for Sustainable and Responsible Finance of Spain (FINRESP) has done great work moving Spain towards more sustainable financial activity, and its ongoing conversation with the UK’s Green Finance Institute is the beginning of an exciting collaboration.” –Hugh Elliott, British Ambassador to Spain and Andorra.
“At FINRESP, the Center for Sustainable and Responsible Finance of Spain, we embrace all forms of public-private collaboration bringing together and aligning the interest of expanded networks spanning governments, corporates and business and civil society associations. Based on that conviction, we keep a close watch and admire the Coalition for the Energy Efficiency of Buildings promoted by the Green Finance Institute as an initiative to promote an ecosystem of stakeholders and exchange best practices to accelerate building renovation in Spain. Consequently, we look forward to exploring a similar initiative in our country.” – Juan Carlos Delrieu, Director of Strategy and Sustainability, Asociación Española de Banca
“When it comes to renovating EU buildings, there is a multi-billion euro investment gap that needs to be filled with private capital. The EU’s Next Gen EU funding over the next five years is a fantastic platform upon which to build the necessary financial and stakeholder environment to invest into the green recovery. Public-private partnerships, like the one promoted by the Green Finance Institute in this paper, have the capability to unlock the barriers to investment and bring products to market that will catalyse the renovation of buildings and contribute towards the goals of the Renovation Wave.” – Dr. Steve Fawkes, Managing Partner, ep group.
 Buildings Performance Institute Europe (BPIE)
 https://ec.europa.eu/energy/sites/ener/files/eu_renovation_wave_strategy.pdf added to the Commission’s current estimated spend of €85-90bn x10