April 30, 2014

New finance for energy efficiency investments: Deutsche Bank contributes to EU report

How can new capital be directed towards investments aimed at improving energy efficiency? Deutsche Bank contributes its expertise to an EU report on energy efficiency finance.

Deutsche Bank was one of eighteen private and public financial institutions that recently published recommendations on financing technologies that reduce energy use in buildings. The Energy Efficiency Financial Institutions Group (EEFIG) was established as a permanent working group with the European Commission and the United Nations Environment Programme Finance Initiative (UNEP FI). The aim of the group is to use their experience to increase the scale of energy efficiency investments across the EU.

Energy efficiency of increasing strategic importance for Europe

The report „Energy efficiency – the first fuel for the EU economy“ concludes that energy efficiency is of increasing strategic importance for Europe due to the high level of energy imports (2012: EUR 400bn), rising energy prices, energy security concerns and the need to reduce carbon emissions and address climate change. The report states that investing in technologies that reduce energy use has the “potential to emerge into the mainstream as a key driver of EU competitiveness, economic value, innovation and employment across Europe”.

Energy efficiency could return at least €250 billion back into Europe’s economy, accordinding to an Ecofys report last year. Europe’s Energy Efficiency Plan expects to create 2 million jobs, increased industrial competitiveness, together with potential annual financial savings estimated at Euro 1,000 per European household and aggregate annual emissions reductions of 740 million tons of CO2. According to the International Energy Agency, energy efficiency investments across all sectors totaled $300bn in 2011, which is of a similar magnitude to investment in renewable energy and fossil fuels.

Recommendations for investment in energy efficient technologies

Investment in energy efficient technologies present a strong economic opportunity and while there is no single solution, the report identifies a framework of measures to support investment in residential, commercial and public sector buildings. To deliver the multiple benefits of energy efficiency investment, policy-makers and market participants need to work together to build upon the successful models which exist. Current investments are below half of the level required. The report recommends that:
1. The full benefits of energy efficient refurbishments of buildings must be captured and well-articulated with evidence, for key decision makers (public authorities, buildings owners and managers and for households)
2. Processes and standards for buildings’ Energy Performance Certificates, Energy Codes and their enforcement need to be strengthened and improved.
3. It must be as easy for a key property decision maker to value the benefits of energy efficient investments. Accessible and dependable data on buildings and their real, measured and verified energy performance should be available to facilitate the preparation of investment cases.
4. Standards should be developed for each element in the energy efficiency investment process (underwriting, procurement, measurement, verification etc). Standardized documentation is important to facilitate the bundling of investments into green bonds.
5. Appropriate use of EU Structural and Investment Funds (€23 billion for low carbon investments) and ETS revenues through public-private financial instruments will boost investment volumes and help accelerate the engagement of private sector finance through scaled risk-sharing. Grant funding should be shifted towards risk sharing facilities, on-bill repayment schemes and other scalable models and successful case studies.

Deutsche Bank’s financial expertise to assist clients in reducing energy use

There are many ways in which Deutsche Bank is active in energy efficiency and deploys our financial expertise to assist clients in reducing energy use:

  • The Bank has made significant efforts to reduce our own energy use, such as the green refurbishment of the Frankfurt Towers and installing energy efficient services, lighting and heating systems in many of our buildings and using green leases in more of the buildings we occupy. These efforts contribute to the Bank’s carbon neutrality and cost reduction goals.
  • This expertise was used to help win the fund mandate for the European Energy Efficiency Fund, which invests in projects to improve the energy efficiency of public sector buildings.
  • The Global Climate Partnership Fund helps finance local banks in developing countries to improve their capacity to provide green loans.
  • The Sal Oppenheim managed Green For Growth Fund focuses on investments in Southeast Europe and other neighboring countries such as Turkey and Ukraine.
  • DeAWM real estate has formed an energy efficient property investment team focused on retrofits of physical buildings.
  • Energy efficient buildings are an increasing focus for DeAWM real estate, due to the strong alignment with fund performance, growing client demand and regulatory requirements
  • The Corporate Banking & Securities (CB&S) division has structured an energy efficiency bond in California and is a leading player in the growing green bond market.
  • The Private and Business Clients (PBC) division provides loans to businesses and individuals to support energy efficiency and renewable energy investment.
  • The Global Transaction Banking division also supports energy efficiency by providing various services to relevant deals. In the US, escrow and cash flow services were provided to 71 major projects such has upgrading public housing in New York, replacing streetlights in Oakland and retrofitting buildings at multiple Department of Defense installations
  • The Deutsche Bank Americas Foundation has supported the creation of the New York Energy Efficiency Corporation

Several Deutsche Bank research reports were also cited in the EEFIG report:

UnileverHausHamburg.gif
The Unilever-Haus in Hamburg

EU-Report: Energy effi­cien­cy – the first fuel for the EU economy

Investing in technologies that reduce energy use has the “potential to emerge into the mainstream as a key driver of EU competitiveness, economic value, innovation and employment across Europe”.

Net savings

At least € 250 billion

Energy efficiency could return an impressive amount back into Europe’s economy

Banks for increased energy efficiency investments

The Energy Efficiency Financial Institutions Group (EEFIG) was established as a permanent working group with the European Commission and the United Nations Environment Programme Finance Initiative (UNEP FI). The aim of the group is to use their experience to increase the scale of energy efficiency investments across the EU.

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