green financing. Credit: Alexa_Space, Shutterstock.
The European Central Bank (ECB) has said that how “green” a business or home is can influence how easily and cheaply it can access bank loans.
According to the latest ECB blog post (November 10), euro area banks are offering better lending conditions for green companies and energy-efficient housing, and tougher lending conditions for polluting companies and old, inefficient real estate.
Banks reward climate-friendly companies
Every three months, around 150 banks in the euro area participate in the Bank Lending Survey (BLS), which tracks changes in credit conditions.
The latest results show a clear trend.
- 20% of banks have eased lending standards for green businesses.
- 13% of companies are transitioning to cleaner operations.
- However, 35% are tightening standards for companies with high emissions.
In layman’s terms, banks give “climate discounts” to companies that invest in green technologies and charge “climate premiums” to companies that pollute the environment.
This marks a major shift in European banking policy, with sustainability now influencing financial risk assessments as much as profits.
Climate and mortgages
The ECB study also found that climate factors are currently influencing mortgage lending.
- Energy-efficient homes (newly built, insulated, and equipped with solar power) are more likely to have lower mortgage rates.
- In contrast, older or poorly insulated properties often face more stringent financing conditions.
Banks also expect these differences to widen next year as climate risks such as flooding, heat waves and sea level rise are increasingly factored into mortgages.
Why “green financing” is important for locals and expatriates in Europe
This trend has real-world implications for anyone buying property or running a business in Europe. Investment in eco-renovations and sustainable housing could accelerate across Spain, France and Portugal, where large numbers of foreigners live, with support from both banks and government incentives.
The bank expects climate factors to strengthen in lending in 2026 as demand for green investments increases.
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