European DataWarehouse Solutions for Energy Efficiency
This is a translated and updated version of an interview conducted by Dario D’Orta with ED Team Members Marco Angheben, Eirini Kanoni and Eugenio Benetti. The original interview was published in January 2020. To view the original article, click here.
What is European DataWarehouse?
Founded in 2012 as part of the implementation of the European Central Bank ABS Loan-Level Initiative, the European DataWarehouse (ED) is the first central data repository in Europe for collecting, validating and making available for download detailed, standardised and asset class specific loan-level data (LLD) for Asset-Backed Securities (ABS) transactions. Developed, owned and operated by the market, ED helps to facilitate risk assessment and to improve transparency standards for European ABS deals.
ED currently hosts loan-level data and relevant documentation for over 1,520 ABS transactions and private portfolios belonging to a wide variety of different originators across Europe. Originators, issuers, sponsors and servicers upload ABS exposure and relevant documentation to ED, while data users including investors, data vendors, rating agencies and public institutions use ED data for monitoring and risk assessment purposes.
ED intends to register with ESMA to provide securitisation repository services under the Securitisation Regulation (EU) 2017/2402. In the meantime, ED assists originators, sponsors and Securitisation Special Purpose Entities (SSPE) to fulfil the regulatory reporting obligations by providing a website compliant with the requirements set out in Article 7(2) of this regulation.
What is your role in the European Commission Horizon 2020 project on residential energy efficiency??
ED participates in the Energy Efficient Mortgages Initiative (EEMI), which a market-led initiative coordinated by the EMF/ECBC and funded via the European Commission’s Horizon 2020 Programme. It aims to deliver a standardised European framework and data collection architecture for energy efficient mortgages.
We are a member of the Energy Efficiency Data Protocol and Portal (EeDaPP) Consortium, which consists of a group of industry experts in data and technology specialising in structured finance and covered bond markets as well as two universities. As part of this project, we have developed, among other things, a technical solution to assist the financial institutions to obtain energy efficiency data from external databases. As a matter of fact, during the mortgage process, banks usually do not generally collect energy efficiency data because it is not a key requirement in the credit granting process. The situation is currently changing, as specific laws across Europe require energy performance certificate for residential and commercial sales and rentals.
We are also working on solutions at a European level to ensure banking institutions comply with the Securitisation Regulation (EU) 2017/2402 (Regulation). This regulation establishes reporting requirements for issuers with respect to energy efficiency information for residential mortgages as well as other underlying exposures such as auto and consumer loans.
The Regulation has further strengthened the financial institutions’ need to collect energy efficiency data. The initiative aims to collect time series of data to achieve compliance with the new ESMA reporting requirements.
There are two key energy efficiency related fields in the ESMA reporting requirements: energy performance certificate value (EPC) of the properties or assets and the EPC provider name. These two fields are required, and their reporting will likely start sometime later this year. In order to help the data collection of this information, our team has created a specific IT matching solution called “Giuditta” between the property and its EPC.
How can we match property data with the respective energy efficiency information?
We retrieved all the open source energy efficiency certificates of the Lombardy region database, which represents an excellence in the Italian system. We then matched the EPCs with loan data that banks provided. Cened, which is part of Infrastrutture Lombarde, is the database of the Lombardy region, and it covers about 40% of buildings in the region. We are looking at similar solutions also in other jurisdictions.
What advantage could this data analysis bring once the green mortgage project finally begins?
There are clear advantages here. The first benefit could be on the financing of new buildings with a high energy efficiency level: A or B. These loans can be pooled into a portfolio and sold to investors. In the Netherlands, for example, they have been issuing green collateral securitisation transactions every year since 2016.
In the case of Italy, where the properties have low energy efficiency levels, there are currently specific fiscal policies in place for improving the energy efficiency of the existing buildings stock. Therefore, in the Italian market we believe that the most significant opportunity is not represented by green mortgages for new constructions but rather loans for improving the energy efficiency of existing properties. One of the main challenges was the lack of a common standardised definition of energy efficient mortgages, which was addressed by the EEMI According to EEMI’s definition, these are intended to finance the purchase/construction and/or renovation of both residential and commercial buildings where there is evidence of an improvement in energy performance of at least 30% and/or where the energy performance is in line with the current EU legislative requirements.
We understand that sustainable finance is a top priority in the policy agenda, and therefore, we expect a growth in the green securitisation and covered bond markets in the coming years.
Which are the other regions that you are working with?
There is a pilot project starting in Trentino Alto Adige, and we are also working with Friuli Venezia Giulia and Piemonte and we hope to apply this to other regions eventually as well.
How is “Giuditta” financed?
We are trying to obtain further financing from institutions. We would like to expand and replicate the Lombardy model by teaming up with the other relevant market participants. Lombardy is the best model that we examined so far as it offers an open source data and the region is willing to share their software to other regions.
How can the privacy issue be addressed?
The biggest obstacle to this project is data protection under General Data Protection Regulation. We are currently working on a legal opinion to determine the best way to share the energy efficiency data for research purposes.
With respect to “Giuditta”, collaborations with other regions aside, are you envisaging the creation of a national system?
We absolutely are. First of all, there is a solid interest in this. We started from zero banks and now we have 16 Pilot banks participating in the EEMI. Enea has been involved as well as other public and private organisations. Many institutions are realizing there is an opportunity for economic return as well as a positive impact on everyday life: if we have more efficient houses, CO2 emissions will decrease and pollution will be reduced consequently, resulting in a better environment for everyone.
What is the best example outside Italy of a database including energy efficiency information?
In an ideal world, we would see what is happening with housing data in England and Wales. There you can connect to a website, insert an address and postal code, and see relevant energy efficiency property information instantly.
Which opportunities and challenges does “Giuditta” face at the national level?
The main challenge is the disaggregation of all data down to the regional level: every region has its own regional EPC registry, very rarely open to the public. Sometimes the access is limited and too often it either does not exist or maybe it can be found in the documentation of some buildings and it cannot be accessed to by anyone not working for the region. A lot of market players are interested in this initiative and we believe that they could be interested accessing the energy efficiency data. Currently, the biggest challenge is that energy efficiency systems are generally not centralised and there is a lack of incentives to centralise it and to encourage interested parties to make data available.
From an economic standpoint, given the present delicate situation, it is fundamental to work together because obtaining results, even in small steps, is going to benefit the environment and the future of our children.
Among the strengths, there is a great positive willingness from all the entities that we spoke with. Not once did we encounter closed door or a lack of interest.