Fitch to factor climate policies in European RMBS valuations

Fitch Ratings may account for the impact of climate-driven policies on residential property values for the first time in its European residential mortgage-backed securities (RMBS) analysis, Fitch announced on Wednesday.

According to an exposure draft released on 3 September 2024, Fitch proposes adjustments to loan-level property valuations based on energy performance standards reflected in energy performance certificates (EPCs).

Fitch views EPCs as a growing factor for homeowners and buyers in Europe, impacting home prices and valuations. The adjustments, which could range from a plus-or-minus 10 per cent change in valuations, are based on the climate resilience and energy efficiency of properties.

Fitch expects a positive rating impact on certain tranches, while transactions attracting negative adjustments are unlikely to see a rating downgrade due to sufficient credit enhancement.

The draft comes as the EU prepares to implement the revised Energy Performance of Buildings Directive by May 2026, increasing the focus on energy-efficient properties.

Fitch anticipates greater availability of loan-level EPC data as this becomes a market standard under European RMBS criteria. The feedback period for the exposure draft runs until 4 October.

Attribution: Fitch

Subediting: M. S. Salama