A new collaboration has been established to work with real estate and finance players from across Europe in a bid to mobilise greater private and public sector investment in building sector decarbonisation.

The Green Finance Institute has released a new paper, entitled ‘Unlocking the Trillions: Public-private innovation to deliver the EU’s renovation wave ambition, and has also launched 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, to co-develop the innovative financial products that will address the 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.

Europe’s building sector is responsible for 40 per cent of energy consumption, more energy than any other sector, and account for 36 per cent of the EU’s energy-related GHG emissions. 97 per cent 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.

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 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 per cent 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 per cent 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 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.

Dr. Rhian-Mari Thomas OBE, chief executive of the Green Finance Institute, said: “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.”

James Drinkwater, head of built environment, Laudes Foundation, said: “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.”

Stephen Richardson, director, Europe, World Green Building Council, said: “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 per cent 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!”

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