Benchmarking the Risks of Energy Efficiency Investments with EU-Funded Platforms

The real estate investment markets have opportunities to tackle climate change. Of the various approaches to reducing greenhouse gases, increasing energy efficiency is one of the most promising options. The real estate sector is responsible for 40% of energy consumption and 36% of CO2 emissions in the EU. In 2018, the European Commission set the target of a 32.5% energy saving relative to the base year 1990 by the year 2030. In the real estate sector, a challenge is connected to the long amortization periods until savings from modernization measures cover the additional resources required. Many real estate investors shy away from high modernization costs, especially for older buildings. 75% of buildings in Europe are energy inefficient and most (75%-90%) of today's buildings will still be in use in 2050. Real Estate investments in higher energy efficiency are often seen as risky. Therefore, one strategy to achieve the EU energy savings target is to create more transparency about the risks and returns of property modernization and the risks of “stranded” assets. Various EU funded initiatives offer benchmark possibilities for efficiency aspects within the real estate sector. Two of the EU-wide available initiatives are: DEEP (De-Risking Energy Efficiency Platform) is an open-source initiative to up-scale energy efficiency investments in Europe. The DEEP platform contains data about financial performance (i.e. payback time of the investment and savings) of about 7,800 building renovation projects. The main objective of the platform is to collect sufficient data in order to provide the users with statistically significant values to understand the riskiness of energy efficiency projects. CREMM (Carbon Risk Real Estate Monitor) aims to assess the risks associated with poor energy efficiency and high emissions at the individual property level, making it possible to develop strategies for portfolio decarbonisation. This contribution examines the strengths and weaknesses of the various real estate benchmark approaches focusing on the risk aspects of energy efficiency within the EU. These databases can be useful tools to collect and compare data about energy efficiency projects and thereby enable capacity building in various European countries. In theory the databases, funded by the EU research program Horizon 2020, can provide evidence of the actual performance of energy efficiency projects, thus supporting the risk evaluation of investments. However, if there is no commercial company behind these databases, there is the danger that the benchmark data is not kept up to date when the research projects have ended and that the quality of the data might be questionable. The contribution examines the value-added of the different concepts. Since energy saving in real estate is of considerable importance in the EU's efforts, a critical assessment of the validity of the various approaches is highly relevant.