Housing finance is a pillar of sustainability

We need a green ecosystem of social cohesion, ESG awareness and financial stability

The Ancient Greek word ‘oikos’ (home) is at the heart of the word ‘oikonomia’ (economy). Home is the nexus between our private interests and society, and a sustainable economy must be built around this concept. It should be based on an ecosystem that promotes green values and raises environmental, social and governance awareness.

The Covid-19 pandemic has highlighted and accelerated the need for change and the banking sector will play a crucial role in the post-crisis recovery. It will help us to ‘build back better’ and close inequality gaps. Banks are more than just financial institutions. They help us to get big ideas off the ground, put a roof over our heads, care for our parents, prepare for our children’s future and support our business ventures.

There is a growing awareness that only global co-operation will tackle the fight against climate change and secure an economy built on sustainability, social inclusion and digitalisation. And financial markets will be pivotal in providing the means to build a new economic paradigm. We have never before seen a pandemic that has simultaneously impacted supply and demand sides around the world. It has affected how we work, how we study, how we interact with people and how we live. Underestimating the depth and the intensity of this change would be a mistake.

If we make the right choices, this crisis can pave the way for a new, green ‘renaissance’. This will open up new global perspectives, in much the same way as the plague triggered a deep revolution of society, the labour market and the financial and technological landscape centuries ago.

Our democracies are rooted in their promise to guarantee a better future, securing access to housing and social mobility. Capital markets and mortgage markets are essential to guaranteeing fair and sustainable societies. Their smooth functioning is not only economically significant but politically relevant. Private stakeholders can play an important role and act as catalysts for a change in mentality. We need to develop constructive spirits, build bridges and show leadership in tackling challenges and creating key building blocks. This will result in an adaptation of financial mechanisms and best practices to the new reality.

As part of this spirit of mobilisation and collaboration, we at the European Mortgage Federation – European Covered Bond Council are fully committed to providing industry responses to the call of COP26 in November and the Conference on the Future of Europe.

The Energy Efficient Mortgage Initiative is guiding a finance community of more than 2,000 global players towards concrete actions such as: defining global ESG best practices; producing academic studies highlighting for example the significant negative correlation between energy efficiency and credit risk; and designing and establishing ESG data infrastructure, including the Energy Efficient Mortgage Label, to promote consumer awareness and confidence, support lender data collection and disclosure and facilitate investor due diligence.

It’s time to build a new ESG ecosystem around the concept of housing. We are committed to funding the hope for a better sustainable future.

Luca Bertalot is Secretary General of the European Mortgage Federation – European Covered Bond Council.

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