EEFIG Underwriting Guide, building knowledge and capability of evaluating value and risks of energy efficiency projects

At the end of 2016 the Commission launched the Smart Financing for Smart Buildings initiative as part of the Clean Energy for All Europeans Package. The initiative promotes more effective use of public funds through innovative financing solutions, provides assistance for project development and supports activities aimed at de-risking energy efficiency investments. The Commission and EEFIG worked closely to change the perception of risk regarding energy efficiency investments. Real technical and financial performance data was gathered for thousands of energy efficiency projects across Europe and made available to the public via the De-Risking Energy Efficiency Platform – DEEP, and a guide to under-writing energy efficiency projects was developed.

Today, EEFIG, the Energy Efficiency Financial Institutions Group, organises a session during the European Union Sustainable Energy Week on how to attract more private financing to energy efficiency investments, and the benefits and risks associated with such investments. This will be the launch event of the new Underwriting Guide, providing information aimed specifically at the different units and individuals within financial institutions whose task is to evaluate, assess, approve and process energy efficiency transactions.

Underwriting, the process of evaluating value and risks prior to making a decision to deploy capital, indeed requires specialist knowledge of the asset class being considered for investment and finance. But building knowledge and capability of underwriting energy efficiency is at an early stage in many financial institutions. This guide is therefore a first attempt to develop a standardised approach, discuss the issue of performance risk, critical as a greater understanding of performance risk will allow it to be managed and priced appropriately. Another challenge in making energy efficiency a normal part of day-to-day activity for financial institutions is the gulf in language and understanding between the financial industry and the primarily technically led energy efficiency industry. This guide also aims to start to provide a common language, which can be used by both sides.

The Guide comes after last year launch by EEFIG of a database on energy efficiency projects across Europe (the DEEP database), gathering real numbers from real projects with new additions all the time. DEEP will contain details of over 10,000 individual energy efficiency projects across buildings and industry. Anyone can use it but it is geared to investors.