Transition risks and opportunities in residential mortgages

Arbeitspapier

A range of studies has analysed how climate-related risks can impact financial markets, focusing on equity and corporate bond holdings. This article takes a closer look at transition risks and opportunities in residential mortgages. Mortgage loans are important from a financial perspective due to their large share in banks' assets and their long credit lifetime, and from a climate perspective due to their large share in fossil fuel consumption. The analysis combines data on the energy-performance of buildings with financial data on mortgages for Germany and identifies two risk drivers - a carbon price and a performance standard. The scenario analysis shows that expected credit loss can be substantially higher for a "brown" portfolio compared to a "green" portfolio. Taking climate policy into account in risk management and strategy can reduce the transition risk and open up new lending opportunities. Financial regulation can promote such behaviour.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 1910

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Energy: Government Policy ; Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth ; Environmental Economics: Government Policy ; Production Analysis and Firm Location: Government Policy
• Subject: Mortgages ; Residential Buildings ; Carbon Risks ; Transition Risks ; Valuation ; Climate Policy Scenarios ; Policy and Regulation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schütze, Franziska
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/226822
• Last update: 10.03.2025, 11:45 AM CET