Banks now require commercial real estate to meet strict green standards, focusing on carbon emissions
Some of the world’s largest banks are now imposing stricter criteria on loans to commercial real estate, reports the Financial Post.
This shift focuses on the carbon emissions of buildings and the expected costs to meet new green regulations. The European Union's recent Energy Performance of Buildings Directive (EPBD) is part of these regulations, and major banks are beginning to respond.
BNP Paribas SA, the EU’s largest bank, aims to cut the emissions intensity of its commercial real estate portfolio by up to 41 percent by 2030. Other banks, such as Banco Santander SA, Barclays Plc, ING Groep NV, and NatWest Group Plc, are also taking similar measures.
These new criteria represent a shift in how banks manage risks in their loan portfolios. Commercial real estate, already affected by higher interest rates and changing occupancy rates post-pandemic, now faces additional scrutiny due to older properties requiring upgrades to meet green standards.
Roxana Isaiu, chief product officer at ESG data and benchmarking provider GRESB, noted that her firm has recently been approached by bankers seeking to understand the new green requirements for buildings.
“The signals from the regulators are clear,” said Isaiu, who has mostly worked with equity investors.
Although the EU’s implementation of EPBD will take several years, it is evident that buildings not meeting these standards risk becoming stranded assets that cannot be sold or rented.
The EU estimates that around 85 percent of its buildings were constructed before 2000, with 75 percent having poor energy performance.
