What do bank sustainability disclosures tell us about Europe’s renovation challenge?

In recent years EU banks have introduced comprehensive disclosures on the climate risk exposures of their loan books and their ‘greenness,’ the latter expressed with the so-called EU Taxonomy alignment metrics. Among other things, this gives investors and other users insights into how much banks are contributing to the sustainability transition. One key challenge in Europe certainly concerns the energy efficiency of our buildings, since buildings are responsible for around 40% of final energy consumption and approximately 35% of energy-related emissions (European Commission 2024). The EU – and also many countries outside the EU – have realised that by financing the renovation of buildings and the construction of new highly energy-efficient buildings banks can help the renovation agenda, reduce their own climate transition risks and ideally even expand their business.

Among other sustainability data points, banks also report a range of information related to the energy efficiency of buildings as part of their disclosures. What do these disclosures tell us – and what do they not tell us – about the renovation challenge?

Looking at the Pillar 3 ESG data on the EU’s ten largest credit institutions’ (2024 data published in 2025), the figures suggest that we still have a long way to go:

• Around 19% (unweighted average) of residential mortgages fall into the best 0-100 kWh/m²/year energy performance bucket.
• However, on average, more than 60% of these data are estimated, even by the largest banks.

Note that the 0-100 kWh/m² category is broad, and many buildings in this group are still far from being energy-efficient from a net-zero perspective. That said, the high proportion of the data that are estimated may be the more important issue. Even though banks’ models are improving and new data collection processes are implemented, it is striking how scarce granular and reliable data still are. For many loans, banks still lack trustworthy EPC certificates.

The EU Taxonomy alignment ratios also show a mixed picture. Among household loans collateralised by residential property, the average share of Taxonomy-aligned assets is 9.3% in the ten largest EU banks, with virtually zero aligned-renovation loans reported. While these figures may appear disappointing, there are reasons for cautious optimism. Maybe the reports show a worse picture than the actual reality. Banks face significant challenges with retail Taxonomy reporting. Beyond the limited availability of EPC data, the application of ‘do no significant harm’ criteria and minimum safeguards to household lending creates substantial obstacles to both origination and reporting. Organisations such as the Platform on Sustainable Finance and the European Banking Federation have therefore called for simplification of the Taxonomy rules for mortgages and renovation loans.

The legislative process for revision of the EU Taxonomy offers an opportunity for improvements. Similarly, the coming implementation of the Energy Performance of Buildings Directive is equally promising. With measures such as harmonisation of EPC ratings, provisions enabling access by banks to EPC data and the introduction of minimum energy performance standards for buildings, the EPBD has the potential not only to stimulate renovation demand on the client side but also to equip banks with the information they need. The well-known old cliché that ‘you can only manage what you can measure’ applies nowhere more clearly than to Europe’s energy-efficient buildings finance challenge.