FAQ: What Does the Revised Energy Performance of Buildings Directive Mean for EU Securitisation?

This commentary delves into the details of the recent political agreement reached among the European Commission, European Parliament, and European Council on a proposal to revise the Energy Performance of Buildings Directive (EPBD). The EPBD is the main legislative framework through which EU policymakers are seeking to drive improvements in the energy performance of new and existing buildings (both residential and non-residential). Under the revised EPBD proposal, amongst other points, (with some exceptions) new residential and non-residential buildings must be net-zero-emission buildings starting January 2030. In our view, the path towards more sustainable economies could also give rise to new securitisation asset classes in the EU, while at the same time garnering the environment for generation of more data, increasing transparency, facilitating standardisation (to the extent possible), and making that data ubiquitous.

We also discuss in this commentary how, on one hand, some of the proposed changes to the EPBD could be credit negative for certain borrowers, while aiming to do good for the environment. However, mortgage portfolios primarily comprising loans backed by highly energy-efficient properties may imply reduced loss given default.