Global banks target carbon emissions in real estate loans

Loans to commercial real estate at major banks face new tests due to carbon emissions and green regulations, as reported by Bloomberg on Sunday.

The EU’s Energy Performance of Buildings Directive (EPBD) is prompting banks like BNP Paribas, Banco Santander, Barclays, ING Groep, and NatWest to cut emissions from their real estate portfolios.

BNP Paribas targets a 41 per cent reduction by 2030, while Barclays aims for a 51 per cent reduction in the UK.

The EU estimates that 85 per cent of its buildings were built before 2000, with 75 per cent having poor energy performance. This creates challenges for banks with older properties, risking them becoming stranded assets. Some banks may use synthetic securitisations to transfer emissions risks to outside investors.

BNP now considers climate impact in its lending and bond underwriting decisions, and Barclays is working with clients to address emissions risks.

Buildings in the EU consume over 40 per cent of the region’s energy, pushing banks to play a key role in cutting building sector emissions by 60 per cent by 2030. BNP also faces climate litigation for allegedly not meeting its environmental obligations.