EU and other public funds alone will not be sufficient to cover the investments necessary to reach the energy and climate objectives in 2030 and 2050.
Moreover, energy efficiency investments face a number of barriers: a fragmented market, complex decision-making processes and split incentives are amongst the key ones. The lack of knowledge and data about the benefits of energy efficiency improvements and the related uncertainties are also important obstacles.
Therefore, setting favourable framework conditions is necessary to ensure private financing supply to investments in energy efficiency of buildings, industry, transport and other sectors. This process takes place in the broader context of the EU policy focus on Sustainable Finance and the development of the Strategy for Financing the Transition to a Sustainable Economy, which also covers the financing framework for energy efficiency investments.
Attracting private investments
Energy efficiency investments can be perceived as too risky by financial markets. There are several factors contributing to this perception, but it is difficult to address due to a lack of data. For example, most loans for energy efficiency investments are not labeled as such, but rather as personal loans or general credit lines for companies.
To change the risk perception, it is important to gather data, promote appropriate labelling and provide guidance for risk assessment.
European Energy Efficiency Financing Coalition
The European Energy Efficiency Financing Coalition is developing a platform for EU countries, financial institutions, and the Commission to collaborate on energy efficiency financing. The Coalition aims to identify barriers to financing for energy efficiency and propose concrete actions and solutions for energy efficiency financing.
The Coalition builds on the results of the Energy Efficiency Financial Institutions Group (EEFIG), which was created in 2013 by the Commission and the United Nations Environmental Programme Financial Initiative (UNEP FI). It acted as an open dialogue and work platform to discuss barriers to long-term financing for energy efficiency and propose policy and market solutions to upscale energy efficiency investments.
In the framework of EEFIG, The De-risking Energy Efficiency Platform (DEEP) was developed. It is the largest pan-EU open-source database containing detailed information on the technical and financial performance of over 15,000 industrial and buildings-related energy efficiency projects. It incorporates performance track records and helps project developers, financiers, and investors better assess the risks and benefits of energy efficiency investments across Europe. The Commission encourages all market players to support this initiative by sharing available data and performance track records.
De-risking project examples
The following projects were all funded under the Horizon 2020 programme:
- The Carbon Risk Real Estate Monitor Project (CREEM) developed a risk assessment tool that allows investors in the commercial real estate sector to analyse the risks of stranded assets due to low energy performance and to reallocate investment into more energy efficient buildings.
Multiple benefits of financing energy efficiency
Studies show that energy efficiency investments are done, not only for the positive effects on energy consumption, energy costs or greenhouse gas emission mitigation. Capital is also invested for multiple benefits, such as the creation of sustainable jobs, better health, less pollution, higher living comfort for EU citizens, long-term competitiveness of the EU economy and alleviating energy poverty.
Documents
- Report on the evolution of financing practices for energy efficiency in buildings, SME's and in industry (April 2022)
- Report - The quantitative relationship between energy efficiency improvements and lower probability of default of associated loans and increased value of the underlying assets (April 2022)