European banks face a deepening crisis in their residential mortgage portfolios; Increasing energy efficiency requirements threaten real estate values and the economy as a whole.

Statistics indicate that more than 85% of buildings in the European Union were built before the year 2000, and that 75% of them suffer from “poor energy performance.” The European Union is therefore required to reduce construction sector emissions by 60% by 2030, and to make it carbon neutral by 2050.

This ambitious target represents a huge challenge, especially taking into account that the “largest energy consumer in Europe” is the buildings sector; It represents 42% of total energy consumption.

It is estimated that more than 60% of homes in Germany will need green renovations in the next decade, at a cost of between €740 billion and €1 trillion.

Deutsche Bank estimates that an individual home may need more than €100,000 in renovations to comply with the highest energy efficiency standards in the European Union; Which constitutes a huge burden on homeowners. On the other hand, a third of Deutsche’s clients from the private real estate sector face a lack of financial means to modernize their homes. Which threatens Germany's climate goals.

European banks are trying to mitigate energy efficiency risks by obtaining capital relief deals from other lenders, or by searching for innovative financing solutions to provide green real estate loans at affordable prices.

On the other hand, European banks are trying to cooperate with governments to implement incentive programs that encourage homeowners to improve the energy efficiency of their homes.

Investments in green infrastructure, energy supply, and environmentally friendly building materials are essential to achieve progress towards net zero in the real estate sector.