Neat energy companies are benefiting from this coming change. Aira, a Swedish heat pump installation company, recently announced that it had entered into a €200 million ($214 million) loan agreement with BNP Paribas. Thanks to this, Airy customers in Germany will be able to pay for heat pumps in installments.
“Banks and financial institutions have a huge responsibility to accelerate the energy transition,” says Eirik Winter, CEO of BNP Paribas in the Nordic region. The fact that a financial solution could also raise property values is a “positive side effect,” he adds.
Home renovations and energy upgrades are not economical. Loans are often necessary to sufficiently lower the barrier to entry for consumers. Lisa Cooke works for MCS, the body that accredits heat pumps and installers in the UK. She says she was able to afford the heat pump on her own thanks to a government grant and almost £5,000 ($6,300) in funding from Aira. “That’s how I managed to achieve this,” he says. “Even with savings, I wouldn’t be able to do it otherwise.”
Luca Bertalot, secretary general of the European Mortgage Federation – European Covered Bond Board, says there is a huge risk to economic productivity if people are unable to secure homes that protect them against the worst effects of climate change. He notes that worker productivity declines during heatwaves, which has a negative impact on GDP. On the other hand, it speaks of something like the butterfly effect of energy modernization. If people make it cheaper to chilly or heat their home, they may save money that they can spend on other things – for example, their children’s education, which in turn increases their chances of living comfortably (and perhaps buying an air conditioner) safely. home) in the future.
However, there may still be a delay in recognizing the coming storm. Energy efficiency does little to protect properties from the more dramatic effects of climate change – stronger storms, rising sea levels, wildfires and floods. With governments unable to cover the costs of these disasters, lenders and insurers will likely become vulnerable. For example, the US National Flood Insurance Program already exists is bending under the weight of growing debt.
“As the damage mounts, it may be the case that markets become more efficient and incentives become more effective [to harden properties] become stronger, because no one saves you anymore,” says Ralf Toumi from Imperial College in London, a consultant for insurance companies.
Ultimately, the effects of climate change on housing will force some to move elsewhere, Burt suggests. Given the irreversibility of certain scenarios, such as coastal villages that may be lost to the sea or communities doomed to endless drought, there are some assets that no amount of strengthening or modernization will ever save. The structural usefulness of these properties will simply evaporate, like water in a drying oasis.
To ease the burden on those most at risk of losing their homes to climate change, consumers in these areas could one day be offered affordable loans to help them move to safer places, Burt says. Lenders who do not take this approach and continue to offer mortgages on homes that will succumb to climate change may soon rue the day. “If you’re trying to support these markets,” Burt says, “you’re throwing good money after bad.”