Best-in-class data will pave the road to more efficient housing in Europe

Many of Europe’s buildings are an environmental challenge. Buildings consume 40% of the European Union’s energy, and create 36% of its CO2 emissions, according to the European Commission. In order to stimulate more environmentally sustainable homes, mortgages and home improvement loans need to favour the renovation wave. We talk to Marco Angheben, Head of Business Development and Regulatory Affairs at European DataWarehouse and Project Coordinator of the ENGAGE for ESG initiative, about creating a best-in-class data set for Europe’s housing stock.

What’s your one-line description of ENGAGE for ESG initiative?

ENGAGE aims to bridge the financing gap to improve the environmental impact of Europe’s housing.

And now in more detail…what does ENGAGE for ESG involve?

ENGAGE for ESG Activation Investments is an EU-funded initiative comprising six partners which aims to create consistent and harmonised pan-European data disclosure requirements for the alignment of mortgages and home renovation loans with the EU Taxonomy, as well as a centralised portal through which investors and other interested parties can access the sustainability information of loans.

In addition to European DataWarehouse, a securitisation repository registered in both the EU & UK, the ENGAGE consortium consists of Dutch software innovator Hypoport and sustainable mortgage loan originator Woonnu, Spanish mortgage loan originator Unión de Créditos Inmobiliarios (UCI), data protection specialists Dexai, and econometric modelling experts, Università Ca’ Foscari Venezia.

What is the ultimate goal for this initiative?

Our ultimate goal is to stimulate investments into Europe’s building stock to boost the renovation wave and reduce energy poverty. We believe that transparency is key to achieving this.

Why do you think this is an important initiative?

Financial institutions, mortgage lenders, and investors in Residential Mortgage-Backed Securities (RMBS), as well as mortgage and loan pools, need to know that the environmental data related to properties is comparable and consistent if the energy efficiency of the EU building stock is to be improved and Europe’s environmental targets under the EU Green Deal are to be achieved.

ENGAGE for ESG exists to help lending institutions identify the relevant environmental data to align their mortgages and home renovation loans with the EU Taxonomy and other sustainability disclosure requirements. In fact, we have just launched the first version of a new set of templates which apply the logic of the Climate Delegated Act to mortgages regarding the construction, renovation, and the acquisition and ownership of buildings. They are based on the ESMA technical reporting standards for RMBS and, as said, they will provide a framework for lending institutions to assess the alignment of their products with the EU Taxonomy and comply with other sustainability disclosures.

The increased transparency facilitated through the ENGAGE Templates and Portal will likely activate investments in energy efficiency projects relating to residential mortgages and home renovation loans, bridging the funding gap in sustainable finance, and therefore contributing positively to the EU Green Deal and Renovation Wave goals.

Which is the European legislation and policy framework impacting the ENGAGE for ESG initiative?

The ENGAGE for ESG initiative should be placed in the context of the EU Sustainable Finance Agenda and, especially, within the European Green Deal, the Renovation Wave strategy, and the Fitfor55 programme, the EU Taxonomy Regulation and the Energy Performance for Buildings Directive.

The EU Taxonomy is the cornerstone of the EU’s sustainable finance framework, so we have initially focussed our efforts here. However, we are adopting a phased approach and will continue taking the various developing regulations into scope to help institutions comply with as much sustainable disclosure requirements as possible, for instance, the Pillar III disclosures.

You have two Dutch members in ENGAGE, what are their roles?

We are very pleased to have Hypoport and Woonnu on board. Hypoport is an Amsterdam-based fintech services company with a lot of experience implementing securitisation deals for financial institutions and helping shape regulatory standards for the structured finance markets using market intelligence gathered over the past twenty years. Woonnu is one of the greenest mortgage lenders in the Netherlands and works actively to change the way the country uses its housing stock and make it more sustainable.

But the success of ENGAGE relies on the expertise of the consortium as a whole, which boasts a wealth of experience in sustainability. For example, Ca’ Foscari University is specialised in econometric models and is running pilots for us to integrate intelligence from the data. Dexai brings its knowledge of AI ethics and covers the legal aspects related to data collection. UCI are at the forefront of green financing as the first financial entity on the Iberian Peninsula to achieve an Energy Efficient Mortgage Label. And of course, European DataWarehouse brings over a decade of experience in facilitating market transparency through its powerful data reporting technology. It’s an excellent partnership.

What are the main challenges for ENGAGE?

Like most initiatives involving different stakeholders, one of the biggest challenges is balancing everyone’s needs. In the context of the ENGAGE Templates development, the translation of the regulatory requirements for various data fields, for instance, in terms of data availability across different European jurisdictions, has been the biggest challenge.

Where are you right now, in terms of the ENGAGE initiative?

This question is pretty timely, because last month we celebrated the first anniversary of the initiative!

Actually, the second half of 2023 has been very busy because we have been working to deliver some really significant milestones. We recently presented the ENGAGE Templates in a webinar. You can watch the webinar on-demand or download the slides here. Furthermore we also launched the first newsletter, through which we want to spread the news relating to the initiative, all the events, upcoming publications, etc..

In the upcoming months, we will continue fine-tuning the templates and start with the design and deployment of the ENGAGE Portal.

Can other financial institutions, apart from the two pilots in the initiative, benefit from the ENGAGE developments?

Indeed, we always envisaged ENGAGE for ESG as an inclusive, engaging option for all EU lending institutions trying to disclose the alignment of mortgages and home renovation loans with EU Taxonomy requirements.

That is why throughout 2024 we will be organising a range of sessions where we will guide lending institutions in the implementation of the ENGAGE Templates. We trust that the Templates will be highly welcomed by the market, because we have really invested a lot of time and effort in analysing, interpreting, and translating the regulatory requirements into proportionate, logical, and accurate data fields that help lending institutions disclose the alignment of their mortgages with the EU Taxonomy Regulation while avoiding an increased reporting burden.

Once the ENGAGE Portal becomes available, lending institutions will also be invited to register and upload the ENGAGE Templates, which will be checked against a variety of data quality rules.

All in all, I think that the first step for lending institutions interested in the ENGAGE for ESG initiative is to check out the webinar recording and slides to get a taste of what we are working on and what our objectives are.

Of course, the ENGAGE coordination team is also available for one-to-one meetings to provide interested parties with further insights into the initiative.