Recommendation to the European Commission and the Sustainable Finance Platform

Market feedback from testing the proposed EU Taxonomy Technical Screening Criteria for Buildings

In July 2020, a consortium of EU-based Green Building Councils (Green Building Council España (GBCe), the German Sustainable Building Council (DGNB), the Danish Green Building Council (DK-GBC), and the Austrian Green Building Council (ÖGNI)) initiated a study on the "Evaluation of the market-readiness of the proposed EU Taxonomy technical screening criteria for Buildings".

The consortium was joined by a group of 24 financial market participants from Spain, Germany, Austria and Denmark, representing different stakeholder groups directly impacted by the EU Taxonomy regulation: mortgage lenders, financial service institutions, real estate developers, insurance companies, investment funds, pension funds, institutional investors and valuation firms.

These are, among others: ACCIONA INMOBILIARIA S.L.U, Allianz Real Estate GmbH, AP Pension, ATP Ejendomme A/S, Berlin Hyp AG, CORESTATE CAPITAL ADVISORS GMBH SUCURSAL EN ESPAÑA, Danica Pension, DEAS A/S, Deka Immobilien Investment GmbH, Dreyer Logar & Partner, ECE Projektmanagement GmbH & Co. KG, H.A.U.S. Healthy Buildings S.L., ING N.V., LaSalle Investment Management Kapitalverwaltungsgesellschaft mbH, Naussauische Heimstätte, NEINOR HOMES S.A., NREP, PensionDanmark A/S, PKA A/S, Strabag Real Estate GmbH, Teichmann & Compagnons Property Networks GmbH, UBM Development GmbH, value Development GmbH.

The study tested 53 projects, covering the following three Taxonomy activities:

• New Construction (20 projects)
• Renovation (3)
• Acquisition and Ownership (30).

The study initiators and its participants welcome the initiative of the European Commission to create a common language for what constitutes a sustainable investment through a reliable framework of reference that makes their efforts comparable, plannable and scalable to minimise economic risks associated with the impending climate crisis.

While unwaveringly supportive of the Taxonomy principles, this diverse project group is concerned that the recently published technical screening criteria might not find the desired uptake by the market if released in their current form, thereby lessening the real-world impact of the Taxonomy regulation in Europe and beyond.

The need for ambition and changes to the scope and depth of the criteria are fully acknowledged, however, the draft Delegated Act document for consultation, released at the end of November created a situation of uncertainty among the market participants. Therefore, any changes in ambition need to be proportional in relation to the overall objectives of the Taxonomy and need to be actively managed to ensure market buy-in.

Overarching recommendations:

• The development and communication of a clear and reliable transition roadmap regarding higher ambition or changing metrics of and within the screening criteria to enable the market to start preparing for future requirements.
• The establishment of of a clear and transparent procedure for setting benchmarks.
• The introduction of adequate impact assessments, e.g. active steering of Taxonomy development, extension and adjustment processes with real case studies accompanying considered changes upfront to prepare market participants.
• The immediate recognition of existing standards, certifications and labels: data collection, especially regarding technical specifics of the building, is regarded as a significant barrier for those market participants who have not yet introduced standard data capture and management procedures. Standardised information or information based on recognised labels or certifications pose fewer difficulties for market participants.
• The timely development and roll-out of standardised building documentation tools and processes, e.g. through building passports/logbooks or Level(s) reporting.

Recommendations regarding New Construction and Renovation:

• As an alternative to the primary energy demand requirement, also allow proof of climate protection criterion via GHG metrics.
• Change metrics to GHG emissions as soon as possible (coupled, if necessary with energy indicators).

Recommendations regarding Individual Measures:

• Ensure that eligibility of individual measures depends on existence of renovation or climate roadmaps to avoid future lock-in effects.

Recommendations regarding Acquisition and Ownership:

• As an alternative to the primary energy demand requirement, also allow proof of climate protection criterion via GHG metrics.
• Change metrics to GHG emissions as soon as possible (coupled, if necessary with energy indicators).
• Introduction of an additional "transition path" which defines medium-performing buildings for which an established Paris-compliant investment plan is available to increase Taxonomy impact beyond EPC class A rated buildings.

Recommendations regarding DNSH:

• Facilitation of appropriate instruments and processes, allowing less rigid alternative evidence of achieving the defined targets, e.g. simplified evidence via tendering documents
• Inclusion of a development path with statements on both extent / topics of the DNSH criteria and ambition to ensure that DNSH criteria do not undermine climate mitigation and adaptation effort.
• Development of more concrete criteria for the climate adaptation objective.