Renovation of buildings is essential for the decarbonization of economies. It was singled out in the European Green Deal as a key initiative to drive energy efficiency in the sector and deliver on climate objectives. To accelerate the pace of renovations, the European Commission recently launched the Renovation Wave Strategy, which aims to at least double renovation rates in the next ten years and ensure they lead to higher energy and resource efficiency.
The loan is expected to improve the energy performance of old residential buildings in Lithuania by a minimum of 40% and achieving a minimum energy performance class C. It supports an innovative approach to accelerating the pace of building renovation through a combination of long term debt financing, incentives, technical assistance and support for low income households. It also aims to benefit small and medium-sized buildings renovations enterprises (SMEs), which have been hard hit by the Covid-19 pandemic, by offering revenue-generating opportunities.
The loan is provided to the Lithuanian Public Investment Development Agency (VIPA), a National Promotional Institution owned by the Ministry of Finance, and will be on-lent to the Apartment Building Renovation Fund (ABRF), an energy efficiency (“EE”) lending platform administered by VIPA. It follows a €50 million EBRD loan in 2017 to VIPA for energy efficiency and rehabilitation investments in apartment buildings that contributed to average energy use reductions of 62 per cent for homeowners’ associations.
“This is the EBRD’s first investment to tackle refurbishing multifamily apartment buildings at scale using a structured finance approach – a unique approach that we are trying to replicate in other countries,” said Nandita Parshad, Managing Director of the EBRD’s Sustainable Infrastructure group, at the signing.
"We look forward to a long-term partnership with the EBRD. The Apartment Building Renovation Fund managed by VIPA is designed to ensure stable financing of apartment building modernization projects, and this second EBRD loan helps us to continue to successfully implement this important goal for the Lithuanian people,” said Gvidas Dargužas, CEO of VIPA.
The EBRD aims to become a majority green bank by 2025. Within its Green Economy Transition (GET) approach, the Bank has committed to increase financing for the decarbonization of buildings. By financing demand-side energy efficiency investments in residential apartment buildings, the project will help conserve energy, reduce carbon emissions and encourage the use of energy performance practices to generate energy efficiency gains at residential apartment buildings.
With buildings currently responsible for 39% of global carbon emissions, and building stock worldwide expected to double by 2050, their emissions levels need to be cut by 80-90 per cent by mid-century to put the world on the path to limit global warming to 1.5 ºC.
Lithuania has a housing stock of some 38,000 apartment buildings, housing around 66 per cent of the population, with approximately 35,000 built in the Soviet era. To date, only around 4 per cent of apartment buildings have been renovated while the vast majority remains in urgent need of an upgrade to reduce energy consumption.