The Retrofit Revolution Will Be Financed

Europe’s ambition to reduce the energy use of the existing building stock by 80% by 2050 raises many challenges. At the Investor Confidence Project (ICP) we focus on attracting the capital that will be needed for such large-scale building renovation programmes. As European countries put in place their long-term national renovation strategies ahead of Brussels’ April 2017 deadline, we are here to support them with this critical challenge.

For the last two years the European Commission and United Nations Environment Program’s Financing Initiative have convened a group of investors, building owners, trade associations and asset managers to ask them the simple question: what will it take to get you to invest in building energy retrofits?

The 120-member Energy Efficiency Financial Institutions Group (EEFIG) all agreed on the top barrier affecting both the supply of and demand for energy efficiency finance: the lack of standardisation of energy efficiency projects.

Currently there is no common process used across Europe to carry out the full renovation of a building. Every country has their own standards, resources, professional training and best practices and every project developer develops and documents projects in different way.

Additionally, most building energy renovations are at a lower level of investment than institutional investors want to engage in. Projects must be bundled together to attract investors with the level of capital that can transform markets.

But without a common approach to renovation there is no way that different projects, even from the same country, much less from multiple countries, can be aggregated.

Governments seeking to encourage renovation face difficulties from lack of standardisation too. The goal of any publicly funded renovation plan should be to stimulate a market sufficiently that commercial interests take over. But without a set of agreed best practices and processes, each government designs renovation programs independently from each other – and the market.

This results in an inability to scale programs with the help of private capital. Investors will only deploy capital in a renovation market with an established process.

This is the issue that we at the Investor Confidence Project, supported by the Environmental Defense Fund, the European Commission and private foundations, are working on.

Guided by investors, owners, engineers, ESCOs, academia, utilities, insurance and many others we are developing a common renovation process for Europe’s buildings. This process, encapsulated in our open source ICP protocols, can be used by anyone involved in a renovation project to ensure the transparency of the process, prove that industry best practices are being used, that the right professionals are responsible for the project, that the projected savings will be realised and maintained and that the project has been measured and verified by an independent third party.

The ICP Protocols address two key issues for financial institutions – reducing transaction costs and maximising project performance.

The ICP Protocols offer a common language based on already existing European and national standards to allow owners, investors and engineers to work on renovation projects together. By using a common process, investors and government can send clear signals to the market about expectations of how projects should be developed.  

By using an European-wide standard, projects can be aggregated to attract investors, like the European Investment Bank and pension funds, to national and community renovation programs.

The ICP Protocols can underpin national renovation strategies. By incorporating the Protocols, national governments can ensure that best practices will be used to develop projects in a consistent and comparable way. This is critical to attracting private capital and enabling programme managers to collect information to manage and identify system changes.

The Protocols are validated with the help of our 150-organisation strong Technical Forum. This group meets once a month via webinar to review the protocols and other resources we are developing to facilitate project capital flow. We welcome any interested party in joining the Technical Forum and helping us build these tools.

The ICP Protocols and accompanying tools are free for anybody to use and completely open source; just contact our multi-national team if you would like to use them. Thanks to our funding we are not only able to offer these resources in this fashion but also offer technical assistance to any projects or programmes that would like to adopt the protocols.

Ultimately, all of our efforts to help governments adopt renovation strategies will only succeed if owners, banks and investors trust the efficiency community enough to invest. It is crystal clear that standardisation is key to build this trust. ICP Europe is offering the opportunity to standardise retrofit and bring the big money in.

Panama Bartholomy (Programme Director, Investor Confidence Project Europe)


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