Insights Blog

As part of Fit for 55, a legislative package intended to reduce greenhouse gas emissions in the EU by at least 55% by 2030 compared to 1990, the Energy Performance of Buildings Directive is being revised, as we outline here.

The ECB has delivered an own initiative opinion on the proposals.

The ECB welcomes revision of the Directive, which it considers would bring more certainty to the timeline of the sustainable transition in a way that could be taken into account by credit and financial institutions in their decisions on portfolio allocations and medium-term financing. It notes that efforts to improve access to energy performance certificates (“EPCs”) would allow institutions to improve the climate-related transition risk assessments of their real estate assets.

However, the ECB is concerned that the proposals define common criteria for only the best and worst EPCs for each Member State, without fully harmonising the underlying definitions and methodologies, which would be left to be determined at national level.

The ECB is concerned that, from a risk perspective, this will reduce comparability across Member States and the usefulness of EPCs as proxies for the riskiness of a specific real estate asset. It states that a more harmonised methodology would help the ECB, in its prudential supervisory functions, to assess the impact of energy efficiency on credit institutions’ real estate exposures, on the basis of reliable and comparable data as well as common and standardised definitions at EU level. It would enhance the Eurosystem’s capability to properly monitor and assess the impact of the climate-related financial risks on the assets it holds on its balance sheet, and ensure adequate risk protection of the Eurosystem’s balance sheet.

The ECB seeks: (a) a more harmonised methodology for EPC labelling across the Union; (b) full and timely access to EPC databases for credit and financial institutions to manage their climate-related transition risks; and (c) transposition of the proposed Directive by the end of 2024, rather than 2025, as initially proposed.

Further details of the ECB’s observations are available here and its drafting proposals are here.

The Parliament recently adopted its first reading position on the proposed recast Directive here. The next step is informal trialogue negotiations.