Two-tier framework proposed to standardize EU green loans
Banca d'Italia researchers propose a two-tier classification for EU green loans to resolve operational hurdles under the EU Taxonomy. The system pairs full Taxonomy compliance with a simplified, performance-based route grounded in energy performance certificates.
Two tiers for real estate finance
EU buildings account for 40 percent of energy consumption and 36 percent of carbon emissions, yet green lending lacks a unified definition.
European Banking Authority data reveals that among 83 surveyed banks, 50 rely on internal metrics, 12 follow technical screening criteria alone, and only 7 apply full EU Taxonomy rules with Do No Significant Harm requirements.
To resolve this fragmentation, the authors propose a two-tier classification for construction and real estate debt.
Tier 1 maintains full Taxonomy alignment, including minimum safeguards.
Tier 2 establishes an operational, performance-based route that exempts lenders from mandatory DNSH checks while setting standardized energy thresholds.
Thresholds anchored in energy certificates
Under Tier 2, new construction qualifies with an energy performance certificate in the top two national classes (A or B) or primary energy demand 10 percent below nearly zero-energy building thresholds.
Building acquisitions require top two EPC ratings or placement within the top 15 percent of the regional stock.
Renovation loans must achieve a 30 percent reduction in primary energy demand or an upgrade of at least one energy class.
The framework covers secured and unsecured bank lending at origination.
Pragmatic relief for stalled lending
The proposal offers a realistic compromise between regulatory purity and operational reality.
Bypassing burdensome DNSH checks removes the fear of greenwashing that currently silences bank disclosures.
Broad adoption will depend on whether regulators integrate this tier into prudential rules.