Energy Factors and Commercial Mortgages

Currently,commercial mortgage underwriting, valuation and asset management practices are not fully accounting for energy factors and the impact of energy costs on net operating income. This discrepancy results in energy efficienct, high-performance buildings being improperly valued and energy risks that are not properly assessed and mitigated. By leveraging commercial mortgages, effective energy risk assessment, and mitigation via energy efficiency, Better Buildings Partners can tap into an important channel for scaling energy efficiency investments and reducing risk within their portfolio.

This project aims to create a foundation for which scalable interventions can be developed to improve commercial mortgage underwriting and risk mitigation. The project is sponsored by the US Department of Energy’s Building Technologies Office, and is led by Lawrence Berkeley National Laboratory (LBNL) in collaboration with the University of California Berkeley’s Haas School of Business and the Institute for Market Transformation (IMT). The analysis developed for this project uses a unique method of merging and matching building level energy data, benchmarking disclosure data, energy price data, and commercial mortgage loan data.

  Presentations

 

NIBS: Energy and Default Risk in Commercial Mortgages
Paul Mathew from LBNL, and Nancy Wallace of UC Berkeley presented their research methodology and recent findings during a webinar with the National Institute of Building Sciences (NIBS). (September 2017)

Commercial Mortgages: Energy Factors and Default Risk Webinar
In this recording, you can hear our project leads, Paul Mathew (LBNL) and Nancy Wallace (UC Berkeley) explain their research results, and how energy factors can impact default risk in commercial mortgages. (September 2016)

Commercial Mortgages: An underutilized channel for scaling energy efficiency investments?
This presentation was given at the ACEEE Summer Study for Buildings in August 2016 by Jeff Deason (LBNL) and provides a summary of the commercial mortgage project and some potential interventions that could improve the assessment, valuation, and mitigation of energy risks. (August 2016)

  Reports

 

Financing Energy Efficiency Through Mortgage Loans
The following market analysis examines the current landscape for buildings owners and lenders seeking to integrate energy efficiency and utility savings into building assessments and retrofit plans, and to utilize the data to enhance traditional loans. The analysis was performed by the Institute of Market Transformation (IMT) and Lawrence Berkeley National Laboratory (LBNL), with funding from the U.S. Department of Energy (DOE). In it, we examine real properties that successfully utilize existing programs to help building owners account for energy efficiency during mortgage underwriting, and offer guidelines for the mortgage lending community and building owners on how to roll energy efficiency retrofits into traditional mortgages in an effective and seamless manner. 

Impact of Energy Use and Price Variations on Default Risk in Commercial Mortgages: Case Studies
This report documents the impact of energy use and price variations on commercial mortgage default risk in five buildings: an office building in the Denver area, two office buildings in northern California, a hotel in the Denver area, and a multi-family residential building in San Francisco. (September 2017)

Impact of Energy Factors on Default Risk in Commercial Mortgages
This is a first study of the effects of building-level energy consumption and the risk over time of energy pricing on the default risk of commercial mortgages. (June 2017)

Energy Factors in Commercial Mortgages: Gaps and Opportunities
This scoping report characterizes the current issues in the treatment of energy and potential interventions to promote greater inclusion of energy factors in the commercial mortgage process. It includes the results of a literature review and extensive stakeholder discussions with 40 lenders, owners, service providers, advocacy organizations and others. (September 2016)

Commercial Mortgages: An underutilized channel for scaling energy efficiency investments?
This paper presents findings from a scoping study addressing current perception of energy factors in commercial mortgages. This paper presents a review of current practices regarding the incorporation of energy factors into commercial mortgage underwriting and valuation, details the impacts of energy factors on property values, net operating income and mortgage valuation, and proposes interventions to properly address energy factors in commercial mortgages, based on extensive discussions with stakeholders. (August 2016)