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MORTGAGE PORTFOLIO STANDARDS: THE EPBD DELEGATED ACT PROCESS CAN SYNCHRONISE REGULATORY DEVELOPMENTS, CLIMATE INITIATIVES, AND EU TECHNOLOGIES TO OFFER A WINDOW INTO THE FUTURE

  • Mortgage Portfolio Standards: The EPBD Delegated Act process can synchronise regulatory developments, climate initiatives, and EU technologies to offer a window into the future

    By Peter Sweatman and Mauricio Yrivarren

    Published in July 2024

    The formal adoption of the EPBD in April 2024, calls for the drafting of a Delegated Act for the voluntary uptake of Mortgage Portfolio Standards (MPS). This briefing document identifies key energy efficiency related elements and provides a way to synchronise them under an all-encompassing future-looking MPS. The purpose is to speed up the mass renovation process of EU buildings through the use of the latest EU-funded technologies, and in turn deliver decarbonisation targets and ensure a just transition for all Europeans. These elements include:

    • A set of recommendations for the European Commission to take into account when convening its own experts and third parties to draft the DA for Mortgage Portfolio Standards (MPS).
    • Recent technology developments related to measuring and improving buildings’ energy performance and how they can complement climate finance, and ensure that EU buildings are resilient to climate, economic, and technological changes.
    • The set of decarbonisation and disclosure initiatives already in place and how MPS can build on their reach and advancements.
    • An analysis of MPS in the frame of the Energy Efficiency Directive (EED) recast adopted in September 2023, and its subsequent recommendations for Article 30.
    • The complementary role of the EU Renovation Loan (ERL) and need for a European green guarantee.

Key recommendations include:

  • EU funded technology can enable the quick and accurate diagnosis of the energy performance of buildings in all EU MS.
  • The Mortgage Portfolio Standards Delegated Act expert group must convene in-house EU experts already familiar with MPS and its related elements.
  • The DA on MPS can arrange the set of elements and available technology needed for MS to meet their EPBD 2030, 2040, and 2050 renovation objectives.
  • Financial institutions are increasingly aware of embodied carbon in their mortgage financing operations.
  • The DA on MPS can help synchronise the EPBD and the EED. These recast Directives are intertwined and must maximise their ‘future oriented’ potential.

Milestones include:

Published on January 8th 2025, the European Banking Authority (EBA) Final Report “Guidelines on the management of environmental, social and governance (ESG) risks” referenced MPS under:

Portfolio alignment methodologies

The EBA should encourage European banks to voluntarily uptake Mortgage Portfolio Standard (given that mortgage portfolios are a material source of climate risk) as part of their strategies to decarbonise their assets and to manage and act upon their ESG risks, and rely on the NZBA portfolio-level tools. European banks would then develop emissions metrics using on PCAF to quantify financed emissions, and finally set targets through SBTi.

ESG risks in credit risk policies and procedures

The EBA should encourage financial institutions to voluntarily adopt Mortgage Portfolio Standards (‘MPS’). For the purpose of valuing collateral the IVSC International Valuation Standards could be referred to as they are applied globally.

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