Directive (EU) 2024/1275 on the energy performance of buildings is the cornerstone of European policy on energy renovation and the main instrument for delivering the results envisaged by Renovation Wave.

This directive lays down the rules for decarbonising buildings across the EU, in line with the objectives of the EU Green Deal and REPowerEU.

Its Article 17 strengthens the legal and political framework for mobilising investments in energy renovations and directing them to where they are most needed.

Despite the multiple benefits of energy renovation, the pace of such renovations in the EU building stock and the volume of investment have so far been insufficient to achieve the climate and energy goals for 2030 and 2050.

In order to address this problem, the Directive contains a number of provisions to boost renovation, for example, Member States are required to adopt national building renovation plans with targets, policies and measures to ensure that the building sector can contribute its full potential to their energy savings and wider decarbonisation strategies.

Private investors and financial institutions have a key role to play in increasing the pace and depth of renovations, firstly by reducing the time lag between the initial costs of the renovation and the time when the associated benefits are realised, as well as by acting as trusted partners for building owners at some pertinent thresholds for energy renovations (situations where building owners might normally consider launching a renovation), such as the (re)financing of an acquisition.

Factors influencing the availability of finance from financial institutions and its utilisation by building owners include:

i) the initial costs of renovations and the associated perceptions of risk and return;

ii) relatively fragmented demand, since ownership of buildings is usually less concentrated than for other types of assets;

iii) an inadequate offer for certain categories of building owners, namely owners with lower incomes or older owners (due to the high guarantees required and the cost of capital and property);

iv) lack of information and little knowledge of the financing available;

v) numerous and complex procedures or regulatory restrictions for accessing public support (technical and financial) which can discourage owners and financiers and make it difficult to combine public support with private financing.

According to the European Commission, in the absence of specific and effective public measures aimed at financial institutions, the current framework of insufficient financing could jeopardise the full implementation of Renovation Wave.

It is also likely that financial institutions will focus on lower-risk financing operations, thus possibly leaving the most vulnerable households and the worst-performing buildings behind.

In short, the current market deficiencies would remain and may even increase due to greater investment needs.

To address this issue, the co-legislators tasked the Commission with drawing up a delegated act establishing a comprehensive framework of portfolios for voluntary use by financial institutions.

Its aim is to increase loan volumes for energy performance renovations, in line with the European Union’s decarbonisation targets, while protecting vulnerable households and paying particular attention to the worst performing buildings (Article 17(10)).

The general objective of the delegated act is to help lenders increase loan volumes for energy renovations and establish good practices to encourage them to take action in the worst performing buildings, in line with the European Union’s decarbonisation targets, as well as to protect vulnerable households.

As part of the work to prepare the delegated act, the Commission intends to:

• identify current provisions on disclosure, reporting, consumer information and loan conditions, the prudential and sustainable financing framework and related legislation in order to identify potential gaps, obstacles and synergies;
• explore synergies with other implementing actions under the Energy Efficiency Directive and the Energy Performance of Buildings Directive, including the guidelines for Member States and market players to unlock private investments in energy efficiency and the evaluation of financing schemes for energy efficiency and renovation of buildings at national and EU level, and with initiatives led by other Commission services and other institutions, including on the use of financial instruments for energy efficiency under Cohesion policy, the Recovery and Resilience Fund and other relevant EU-led programmes;
• analyse how financial institutions, in cooperation with public authorities, can step up their involvement in energy performance renovations, for example by: i) building on the existing regulatory framework, in particular in reporting and information dissemination; ii) setting self-quantified objectives, for example when developing new financial products or adapting existing ones, in particular with regard to standardisation and strengthening staff energy efficiency literacy and capacity; iii) strengthening cooperation with stakeholders and facilitating access to information;
• analyse how to ensure that vulnerable households also benefit from the comprehensive portfolio framework.

Since the portfolio framework is voluntary, its impact will depend on the degree of adoption.

However, financial institutions that decide to comply with the measures set out in the delegated act will have to allocate a higher percentage of their balance sheet to financing energy performance renovations, with a particular focus on the worst performing buildings.

The set of measures in the delegated act will not be legally binding. Therefore, beyond the degree of adoption, its impact will depend on its effectiveness and suitability to address the specific challenges and obstacles faced by member states, credit institutions, market players and building owners.

The adoption of the delegated act is scheduled for the first quarter of 2026.

Our team is at your disposal for more information.