The Association of German Pfandbrief Banks (vdp) is clearly critical of the EU Commission's drafts for the revision of the EU taxonomy. Specifically, it is about planned adjustments to the delegated acts on the six environmental objectives mentioned in the framework. From the vdp's point of view, the drafts fail to achieve the goal of applying the taxonomy more strongly in the banking sector to real estate financing and increasing its market acceptance. The main criticism is that the taxonomy will lack practicality even after the revision.
"Renovation activity continues to be slowed down rather than promoted."
Sascha Kullig
"From the point of view of the banking industry, the drafts are disappointing – they are impractical and still have far too much complexity," said Sascha Kullig, member of the vdp executive board. Thus, the taxonomy does not achieve the goal of becoming a control instrument for the decarbonization of the building stock. "Renovation activity continues to be slowed down rather than promoted. From the point of view of the credit institutions, the taxonomy requirements thus degenerate into a purely mandatory exercise in sustainability reporting."
The vdp has brought together its points of criticism in a statement – in response to the consultation launched by the EU Commission in mid-March this year. In it, the vdp calls for a fundamental revision of the drafts and names the following deficits and Petita, among others:
- The exclusion of efficiency gains from energy efficiency measures – e.g. from the installation of a photovoltaic system – is not practicable. The planned Do-No-Significant-Harm (DNSH) audit obligations for water protection, circular economy and environmental pollution are also excessive – they are often disproportionate to the financing volumes and do not take into account the actual data situation.
- The vdp calls for the complete waiver of DNSH testing obligations for renovations; these should instead be designed as observation criteria. Furthermore, conversions to green energy should be credited by the energy supplier in the same way as efficiency gains, e.g. from the installation of a photovoltaic system.
- As welcome as it is that the taxonomy is to be supplemented by a requirement for transition (a building is considered "green" if, among other things, a 60% increase in efficiency over the past ten years can be demonstrated at the time of purchase or financing), applicability is not given. On the one hand, a reduction of 60% is ambitious and often not achievable. On the other hand, banks do not have the necessary historical data for before-and-after comparisons of energy-efficient renovations. In addition, a subsequent examination of efficiency gains contradicts lending practice and is not enforceable vis-à-vis customers.
- Taxonomy compliance must be established at the time of lending on the basis of existing evidence (renovation passport, energy performance certificate) – post-contractual revaluations are neither practicable nor marketable.
- The drafts currently provide that only the loan portion for renovation and not the full financing of building acquisition and renovation is taxonomy. This regulation is incomprehensible and prevents a higher volume of taxonomy-compliant real estate financing.
- The vdp calls for the entire loan to finance the purchase of buildings and the renovation that is often initiated at the same time to become taxonomy-eligible if the savings targets are achieved.
- According to the EU Commission's proposals, the energy requirements for "green" new buildings and younger properties, which are already above the national threshold for a nearly zero-energy building, are to be increased even further. Specifically, it is planned to bring forward new construction standards before the Building Energy Efficiency Directive (EPBD) is implemented into national law, which would prevent applicability.
- The vdp is in favour of the planned premature introduction of new construction standards not taking place.
"Unfortunately, the current draft clearly lacks practical relevance."
Sascha Kullig
"The EU taxonomy can only be effective if it is applicable in practice," said Kullig. "Unfortunately, the current draft clearly lacks practical relevance." The proposed changes would make it more difficult for credit institutions to generate a higher volume of taxonomy-compliant real estate financing and thus a higher green asset ratio. In order not to jeopardize investments in the building stock, the EU should define the criteria for classifying green buildings more functionally, according to Kullig.
The complete vdp statement on the taxonomy consultation is available via the following link: LINK
