Clean energy companies are benefiting from this new shift: Aira, a Swedish company that installs heat pumps, recently announced a loan deal worth €200 million ($214 million) from BNP Paribas that will allow Aira customers in Germany to pay for their heat pumps in installments.
“Banks and financial institutions have a huge responsibility to accelerate the energy transition,” said Eirik Winter, CEO of BNP Paribas in Northern Europe. A “positive side effect” is that lending arrangements could also boost property values, he added.
Home improvements and energy retrofits aren’t cheap, and loans are often needed to lower the barrier to entry enough for consumers. Lisa Cook works for MCS, the organization that certifies heat pumps and installers in the UK. She says she was able to buy the heat pump herself thanks to a government grant and a loan of just under £5,000 ($6,300) from Ayla. “That’s what made it really doable for me,” she says. “Even though I had savings, I wouldn’t have been able to do it otherwise.”
Luca Bertalotto, executive director of the European Mortgage Federation-European Covered Bond Council, says there is a big risk to economic productivity if people cannot secure housing that protects them from the worst effects of climate change. Heatwaves make workers less productive, which has a negative impact on GDP, Bertalotto points out. Conversely, he talks about a kind of energy retrofit butterfly effect: if people pay less for heating and cooling their homes, they will probably save money, which they can then spend on other things, such as their children’s education, thus increasing their children’s chances of living comfortably in the future (and perhaps being able to buy climate-safe housing themselves).
But it may still be too late to recognize the coming storm. Energy efficiency will do little to protect properties from the more severe impacts of climate change: more intense storms, rising sea levels, wildfires, and floods. If governments are unable to cover the costs of these disasters, lenders and insurers will likely be at risk. The U.S. National Flood Insurance Program, for example, is already in crisis under the weight of mounting liabilities.
“As losses pile up, it’s entirely possible that markets will become more efficient and the incentives will be stronger (to fortify property) because no one will bail them out,” said Ralph Toomey of Imperial College London, a consultant to insurers.
Ultimately, Burt suggests, the impacts of climate change on housing will force some people to move elsewhere. With coastal villages at risk of being submerged by the sea and communities facing endless drought, no amount of strengthening or retrofitting will be able to save some assets. Their structural usefulness will evaporate like the water in a drying oasis.
Burt says that in the future, low-interest loans could be offered to consumers in these areas to help them relocate to safer locations, to ease the burden on those most at risk of losing their homes to climate change. Lenders that don’t take this approach and continue to offer mortgages on homes that are destined to be lost to climate change may soon find themselves regretting it. “If you’re trying to support this market, you’re throwing money at it,” Burt says.
