Is green the new normal? Understanding current sustainability practices in European residential property lending

With its substantial environmental footprint, the buildings sector plays a critical role in the green transition. The current pace of green investments in real estate remains, however, inadequate, underscoring the need for more effective policymaking and innovative approaches in green real estate finance (OECD, 2022; Debrah et al., 2022). As the real estate and housing sector is highly leveraged, with financed emissions (Scope 3) from loans and other assets accounting for the majority of banks' greenhouse gas (GHG) emissions (OECD, 2026), sustainability becomes a key issue in property and mortgage lending. Compared to most other physical assets, real estate is strongly present in the capital markets through various real estate-based financial products (Muldoon-Smith and Greenhalgh, 2019), suggesting significant adoption potential for green-labelled products. However, the uptake of green commercial property loans and mortgages has remained modest due to a lack of incentives and standardised data (EBA, 2025; JLL, 2023; OECD, 2022).

As the largest real estate sector, the residential sector accounts for most of the industry's GHG emissions and is particularly vulnerable to climate change, making its green transition especially important (UNEP, 2024; ULI and PwC, 2025). To address the green financing gap, the European Union has in recent years introduced multiple policies and regulations that have reshaped residential real estate lending in Europe. These include the EU Taxonomy Regulation (EU/2020/852) and its amendments, the Sustainable Finance Disclosure Regulation (SFDR) (EU/2019/2088), the Corporate Sustainability Reporting Directive (CSRD) (EU/2022/2464), the EU Green Bond Regulation (2023/2631), and the Energy Performance of Buildings Directive recast (EPBD) (EU/2024/1275), amongst others (Casalini, 2025; Leutner et al., 2024). Despite concerns on potential policy misalignments (see, e.g. PSF, 2025), the EU's efforts to harmonise data requirements are generally regarded as successful, with energy performance certificates (EPCs) becoming the dominant metric in European residential lending (ECB, 2024). However, newer environmental topics such as biodiversity (Newell, 2025; Christiaen et al., 2025), and circularity (Kumar et al., 2023) still lack robust, standardised methodologies for wider adoption.

Despite its relevance in policy and practice, green residential lending – incorporating both consumer and corporate loans – does not appear widely covered in scholarly literature. Rather, research is divided into studies of green (consumer) mortgages and broader green commercial real estate (CRE) finance with a strong focus on office and retail properties. The former strand of literature examines the feasibility of emerging green debt instruments for housing, primarily energy-efficient or green mortgages (see, e.g. Ennin et al., 2026; Dell’Anna et al., 2022), while addressing their wider sustainability implications from both environmental (Ennin et al., 2026) and social perspectives (Casalini, 2025). By contrast, green CRE research is predominantly investment-oriented, focusing on identifying a “greenium” and a “brown discount” in property prices and rents (Wang et al., 2025; Leutner et al., 2024; McCord et al., 2024; Wilkinson and Sayce, 2020; Fuerst et al., 2016), while debt financing has received comparatively less attention than equity financing (Leutner et al., 2024).

Within the scope of residential lending, CRE and mortgage lending share similar sustainability considerations – especially regarding climate risks. Physical and transition risks adversely affect residential property valuations (AEW, 2023; Clayton et al., 2021) and financing terms (Fontana et al., 2025), whereas green mortgages and residential property loans are generally associated with lower climate-related risks. However, green mortgages tend to be more strongly associated with green discounts on interest rates compared to commercial loans; Green mortgage studies consistently report lower interest rates (see, e.g. Götz, 2024; Bell et al., 2023; Dell’Anna et al., 2022), supported by lower payment arrears (Guin et al., 2022) and default risk for energy-efficient homes (Billio et al., 2022, 2025; Thebault and Jamil, 2025). Although sustainability has long been integrated into CRE loan underwriting (Reed, 2014; Lützkendorf and Lorenz, 2007), evidence on the benefits of green commercial property loans remains mixed (Leutner et al., 2024; EBA, 2023). This difference may reflect the greater complexity of commercial lending: while green mortgages rely largely on EPCs (ECB, 2024), commercial loans require more sophisticated underwriting and greater sustainability expertise from corporate borrowers due to their higher risk profile (Cremer, 2020; Tsolacos and Lux, 2022; EBA, 2023). Accordingly, commercial lending often relies on green building rating systems, particularly for non-residential properties (EBA, 2023).

A common feature of both the green mortgage and CRE finance literature is the predominantly quantitative focus (Akomea-Frimpong et al., 2022), while the mechanisms underlying sustainable lending practices across the residential lending market remain underexplored. The subtle and multifaceted changes in sustainable finance landscape are hard to capture in simplistic quantitative models, calling for more qualitative approaches from the lender perspective. Within the scope of residential property sector, this article aims to examine both green corporate lending and retail mortgages through a common analytical framework by answering the following research questions: (1) How does environmental sustainability impact lending processes and conditions in the European residential sector? (2) What are the current green lending practices for residential properties in Europe?

The study uses an abductive qualitative research approach, well suited for making sense of surprising “instances” of a phenomenon (Brinkmann, 2014). Following the logic of abduction, the study moves back and forth between empirical observations (starting with industry workshops and interviews and continuing with a systematic interview study of 25 professionals) and existing knowledge (literature on green property finance), aiming to find explanations for the puzzling question on the current state of “green” in residential property lending. As a result, the study proposes four green lending propositions which serve as a basis for developing new theoretical frameworks. The five-step research process is depicted in Figure 1. The phases are described in detail in the following subchapters.

The first phase aimed to create a preliminary understanding of the investigated phenomenon, grounded in initial empirical evidence. The process started by discussing the topic of green property finance with industry practitioners in two open, in-depth interviews and two participatory workshops. The interviews were held in June 2024, and the workshops in October 2024 and March 2025. The interviewees and workshop attendees were selected to represent different stakeholders in green property lending to ensure multiple perspectives on the topic. As the workshops needed to be conducted live, the participants were based in Helsinki, Finland. The details are outlined in the Supplements, Appendix A.

In the second phase, the authors started forming preliminary propositions based on the initial evidence. The recorded interviews and workshops were transcribed and analysed using Atlas.ti. After the first round of labelling and categorisation, recurring patterns started to emerge from the data. These initial insights were then contrasted with evidence from the literature. The ones that did not get any support from literature were discarded, and the remaining ones were revised to portray the theoretical evidence better. The process continued in an abductive manner, iterating between data analysis and literature review, until the number of preliminary propositions converged to seven. For coherence, the scope of the study was refined to cover the perspective of lenders, i.e. banks.

The preliminary findings from the stakeholder workshops indicated that sustainability issues are more relevant for real estate investors than for homeowners. Furthermore, our preliminary evidence suggested that retail mortgages are more standardised, revolving mainly around the creditworthiness of the borrower. Compared to corporate loans, retail mortgages may therefore offer fewer opportunities to integrate sustainability requirements. Hence, sustainability practices in corporate property lending presented a more intriguing area of research. While the research scope and preliminary propositions were refined to focus on corporate lending, the interview protocol was intentionally kept broad to enable the collection of valuable insights also from the retail mortgage side, contributing to a more nuanced understanding of the residential property lending landscape. The preliminary propositions with references to empirical and theoretical evidence are described in detail in Table 1.

In the third phase, the researchers conducted interviews to evaluate the preliminary propositions. While the propositions provided the thematic backbone of the interview protocol, the interviews were semi-structured to allow richer insights and more authentic perspectives (Qu and Dumay, 2011). The first half of the protocol consisted of open-ended questions, whereas the second part targeted and confirmed specific aspects of the preliminary propositions. The interview protocol and interviewee details are outlined in the Supplements, Appendix B. The interviewees were selected based on the scope of the study, focusing on residential property lending and sustainability experts in Nordic and Central European banks. The interview requests were directed at people working in corporate lending, but some retail mortgage experts were included in the sample to highlight potential differences between the two types of lending. To reduce the risk of bias and bring forth cross-market differences, the authors also interviewed representatives of large, international real estate advisories, each with substantial experience in arranging green finance in wider Europe. In total, the researchers interviewed 25 lending and sustainability experts from 14 different organisations: ten banks and four real estate advisories. All but one interview (nr. 16) were conducted by the main author. As the informants were physically based across Northern and Central Europe, all the interviews were conducted online.

Next, the interview data were compared and reflected against the seven preliminary propositions. After transcribing the recordings (all but one interviewee agreed to have the interview recorded), the researchers started labelling the data using Atlas.ti. This process moved from a purely descriptive to a thematic level, using the propositions as the frame for categorisation. While analysing the interviews, the researchers also used the banks' publicly available green finance framework documents to refine and triangulate the data. The analysis process continued to iterate between data collection and analysis from July until September 2025, until data saturation. In the final phase of the research, the preliminary propositions that received only moderate or contradicting empirical evidence were revised to better portray the findings. Then, the findings were synthesised into four green lending propositions, providing a basis for a tentative new theory. A summary of the results (Table 2) and the synthesis (Table 3) are presented in the next section.

The comprehensive interview results are described in the Supplements, Appendix C. The key insights are summarised in Table 2.

P1. Proposition 1 gained strong empirical support. The interviews confirmed that sustainability considerations have become a normative part of regular residential property lending processes in Europe, whereby green credentials ensure easier access to funding. Most banks employ an in-house ESG team focused on sustainability issues in the lending process. However, EPCs are by default integrated in the credit risk assessments as they directly affect the asset's financial performance and collateral value. EPCs are also used as a tool to measure banks' progress towards their decarbonisation targets. While many interviewees acknowledged EPCs' problems regarding insufficient harmonisation of methodologies and data, they were regarded as the single most important sustainability metric in residential property lending. Banks with European branches typically employ different EPC requirements for each country as the threshold values for EPC classes vary between countries. The geographical presence of the bank also influences the role of physical climate risks in the lending processes. As for other environmental topics like biodiversity, water or circular economy, many banks seemed to incorporate these in the general ESG assessments, although without direct effects on the borrower's creditworthiness.

P2. The second proposition gained mixed levels of support, revealing interviewees' different perceptions of climate risks' impact on lending. For some, climate risks meant only physical climate risks like flooding, whereas for others, climate risks split into physical risks and transition risks, the latter meaning risks of obsolescence due to low energy performance. Transition risks were unanimously perceived as credit risks, with clear effects on business. In contrast, the perception of physical climate risks varied among interviewees, depending on the geographical scope of their organisation. For example, floodings and heat waves were, with some exceptions, not yet viewed as a particular threat in the Nordics. Physical risks are therefore typically only a small part of the general, external risk assessments. Moreover, the two types of climate risks are mostly assessed by different experts and methods.

Transition risk assessments are quantitative, based on EPC ratings. Quantifiability enables banks to directly calculate the impact of the risks on collateral value which affects the loan terms and conditions. Interviewees mentioned that high transition risks may, for example, reduce the loan maturity, cause higher interest charges, and in some cases even lead to loan ineligibility. While banks' tolerance for low-performing buildings seemed to vary, a general requirement was that properties with higher transition risks, i.e. lower energy performance, need to have a credible improvement plan, often tied to the funding.

Physical risk assessments, on the other hand, still mostly rely on a qualitative approach due to a lack of high-quality, numerical data. Only significant physical risks may impact the financing terms, whereas non-acute physical risks are typically addressed as standardised statements attached to the financing contract. The urgency in addressing physical risks depends on the geographical location of the asset and how well adaptation solutions are considered in local regulation and building permits. The general sentiment, however, seemed to be that physical climate risks, along with insurability issues, are becoming a more critical issue in Europe, especially in the Nordics where the building stock is already energy efficient and thus implies lower transition risks. As data and methodologies improve, interviewees expected physical risks to eventually become a more standardised part of banks' risk models.

P3. All interviews showed strong support for Proposition 3. Banks require new development to have very high energy performance, aligned with the EU Taxonomy. According to the interviewees, this requirement is often automatically fulfilled in Europe due to strict national building codes and, in some cases, municipal regulations. Sometimes banks may adjust their lending requirements to accommodate country-specific differences. An interviewee from a Nordic bank mentioned, for example, that due to stricter thresholds for EPCs in Sweden, they only require a Swedish C-level equivalent rating for new buildings in Finland. On the other hand, another interviewee claimed the baseline is rising across Europe, whereby A class is demanded more often compared to earlier years. While the interviews provided somewhat mixed answers in terms of the exact rating required for new buildings, new buildings' high energy performance was generally regarded as rather self-evident.

P4. Proposition 4 received moderate support. The interviews revealed that many banks actively promote green loans. Except for one, all banks had specific green loan products for real estate, with similar, EPC-centric requirements. Taxonomy was referred to as the main standard for banks' green funding frameworks. While many banks still accept commercial green building certifications as proxies, the interviews suggest a gradual shift away from certifications. According to the interviewees, banks' own green asset reporting is a key driver for this change. In addition to the EU's sustainability disclosure requirements, European banks are incentivised to offer green securitised finance products through their own financing mechanisms, which favour green-labelled instruments. The green label is often tied to the EPC rating, making it the most important measure of “green” in banks' loan books. According to the interviewees, banks' green bonds attract funding from a wider range of institutional investors, sometimes more cheaply compared to “vanilla” options. However, such “greenium” was perceived to be decreasing.

Banks also strive to simplify and standardise their green lending policies. Although green lending criteria are almost always based on high energy performance, several interviewees acknowledged that the requirements are sometimes adjusted. For example, banks' green lending policies may be more flexible for very large portfolios, allowing a few properties to be lower performing. For older buildings, striving for an EPC class A or B is often not even feasible. Several interviewees also expressed concerns about alternating interpretations of the Taxonomy and the EPBD across Europe. Some noted, for example, that only a handful of European countries have an official national definition of the Taxonomy's “top 15%” rule. Because of these discrepancies, banks' green lending practices tend to vary even among European countries despite a common green funding framework.

P5. The empirical support for Proposition 5 was strong. Most interviewees confirmed that some green financial benefits are available for green assets, although mostly in corporate lending. The interviewees unanimously agreed that the discounts are typically small, more of a signal than an actual financial benefit. While in retail mortgages the discounts on margins or other loan fees can be standardised (a typical discount on margin at 5–10 bps), for corporate loans, discounts are always granted case by case. The benefits depend not only on the “greenness” of the asset or portfolio, but also on many other factors, like the quality of the customer relationship. Many interviewees also noted that the green discount for corporate property loans is more a consequence of competition for the best assets, rather than a reward for meeting specific criteria.

Other green loan benefits mentioned were a higher LTV, fixed interest rate over the entire loan period, longer maturity and extension rights. However, these benefits seemed rare and, again, highly dependent on other aspects in the credit process. Overall, interviewees found green discounts and other benefits more of a bonus, not actively sought after by borrowers. Sustainability credentials were, in general, seen as a guarantee to access some funding, rather than a way to get beneficial loan terms. Furthermore, some interviewees argued that the market of green loans is gradually merging with regular lending, with a certain level of “greenness” becoming the norm. Green discounts might therefore disappear progressively. Some interviewees even argued that they are not a viable solution as they barely cover the bank's costs of issuing green bonds. Another problem mentioned was the lack of evidence on the positive impact of sustainability on property valuation.

P6. The answers were somewhat divided on Proposition 6. Most banks claimed that they strongly support the green transition by providing loans to major renovations and energy upgrades. However, several interviewees also confessed that financing new buildings is more attractive from the lender's point of view as this is the easiest way to get green credentials into their loan books. New, top-performing buildings were described as a “safe choice”, whereas major renovations were considered more complicated in terms of assessing, reporting, and tracking, which demand significant resources from banks. Moreover, large upgrade projects typically entail higher risks, which might make them ineligible for a loan from a bank's risk management perspective. Some interviewees also mentioned that major renovations aiming at a significant energy performance improvement might not be profitable for the customer and are therefore not encouraged by banks. The current regulatory environment was also perceived to favour demolishing and building new instead of renovating the old building stock.

Yet, for a few banks, funding major renovations is based on a clear mandate and, therefore, as claimed by the interviewees, highly prioritised. Particularly on the retail side, banks have financial incentive schemes to nudge their customers to do renovations and upgrade their EPCs. On the corporate and housing company side, borrowers need to provide a credible development plan and business case to receive funding. In many banks, the project must also meet the Taxonomy criteria for major renovations, but in others this was not a requirement if the energy performance improvement contributes to the bank's decarbonisation goals. Overall, the interviewees emphasised that each case is unique, and that environmental factors, mostly energy performance-related, are only one aspect in the assessments.

P7. Proposition 7 received mostly strong or moderate support. Many interviewees said that non-climate-related environmental topics are already a part of general ESG due diligence processes and building permit requirements, but their impact on lending decisions remains indirect unless the risks are great. The biggest challenge seemed to be the lack of high-quality data and methodologies, and knowledge, to incorporate complex topics like circular economy and biodiversity in loan decision-making. Some interviewees noted that even for energy efficiency and CO₂ emissions, standards are not fully defined yet, and that achieving this point has taken years. Hence, many interviewees regarded it as unlikely that harmonised metrics and methodologies for other topics would be developed any time soon. Customer or investor interest alone was not perceived as a strong enough driver for banks to allocate significant resources to this work.

While many interviewees considered banks' current reporting burden as heavy, others argued that a stronger top-down push for stricter regulation would be needed to incentivise banks to develop and implement better methodologies for sustainability analyses. Currently, the geopolitical instability globally and within Europe was perceived to hinder this development, and several interviewees also raised concerns about the unclarity in the direction of sustainability regulation nationally and within the EU. These uncertainties were perceived to slow down banks' willingness to adopt new ideas, fearing they might do unnecessary work.

Table 3 summarises the findings by displaying the preliminary and a revised, empirically backed-up version of each proposition, side by side. Based on the comparison, the table suggests four green lending propositions synthesising the empirical and theoretical findings.

Apart from P6 for which the evidence was more polarised, the preliminary propositions received surprisingly strong empirical support. This outcome is, however, not unexpected, as the propositions were already grounded in initial empirical observations. While the study primarily investigated corporate property lending, the interview results suggest that most propositions could also apply to the retail side. However, two key nuances emerged from the data. First, retail mortgages tend to have fixed pricing, and information on interest rate discounts or other green mortgage benefits is generally publicly available. In contrast, corporate loan pricing is always negotiated case by case. Second, the results revealed that, on the retail side, banks have financial incentive schemes to support customers' energy upgrades whereas on the corporate side, funding of major renovations is much more dependent on the business case. These differences indicate that energy performance is more straightforward to factor into credit assessments for retail mortgages than for corporate loans.

While the findings rather confirm than refute common sentiment on the practices in green property lending, they do highlight some fundamental gaps and flaws in the current green finance system. First, lack of standardised methodologies and data is a significant barrier for advancing impactful “green” finance – an observation supported by multiple studies and reports (e.g. EBA, 2025; OECD, 2022). With EPCs as the only sustainability metric with a proven, direct link to credit risk and valuation, other sustainability topics risk being a mere sustainability reporting exercise with little real impact on the loan decision-making. This also means that the actual environmental impact of green loans remains limited to the asset's energy performance. Yet, the results demonstrate that nearly all banks offer green-labelled loans although the requirements are very similar to “normal” loans, especially for new buildings. Moreover, the “green discount” on the margin is more of an effect of competition over profitable assets than a reward for sustainability. While a higher share of “green” assets may provide signalling benefits for banks, the findings imply that the benefits of accessing green-labelled loans remain rather marginal for the borrower.

In connection with the lack of more comprehensive sustainability metrics, the results also confirm that the current system is significantly skewed towards rewarding new, highly performing buildings instead of incentivising (or forcing) the upgrade of existing buildings. This is a major limitation as some of the most cost-efficient environmental gains are to be achieved in the existing building stock. Moreover, denying funding for low-performing assets can accelerate asset stranding and shorten building lifecycles. It may also reinforce the unsustainable trend of demolishing “suboptimally” performing buildings that could instead be renovated.

With few exceptions, banks are reluctant to lead the green transition beyond the “safe bets” of EPC A-rated buildings. While the EU Taxonomy has strongly influenced banks' lending practices by successfully aligning the green funding frameworks across Europe, this study demonstrates that the Taxonomy, as it is today, does not provide sufficient steering towards a carbon-neutral built environment. In fact, the findings imply that the introduction of the Taxonomy has reduced banks' ability – and willingness – to be proactive and innovative in how they address sustainability. This (partly unintentional) shifting of responsibility from banks to policymakers in defining “green finance” underlines policymakers' critical role in transforming the sustainable lending landscape. Moreover, the findings demonstrate the importance of clear, implementable metrics and long-term predictability in the regulatory environment.

The article aimed to answer two research questions: How does environmental sustainability impact lending processes and conditions in the European residential sector? What are the current green lending practices for residential properties in Europe? Using an abductive approach, the study formulated preliminary propositions based on empirical and theoretical evidence and evaluated these through a comprehensive interview study. The preliminary propositions suggested that sustainability already affects residential property lending (P1) (see, e.g. Clayton et al., 2021; Reed, 2014), strongly driven by regulation and the negative effects of transition and physical climate risks (P2) (see, e.g. Fontana et al., 2025). Yet, the definition of “green” is still limited to high energy performance – often EPC class A (P3 & P4) – (see, e.g. Saari et al., 2024; Akomea-Fringpom et al., 2022) rather than other environmental issues (P7) (see, e.g. EBA, 2025; Newell, 2025). The benefits of green loans were assumed to vary case by case (P5) (see, e.g. Leutner et al., 2024). Furthermore, P6 suggested a potential misalignment in incentives for banks to finance the green transition (see PSF, 2025).

The empirical evaluation provided strong evidence for four (P1, P3, P5 and P7) and moderate evidence for two (P2 and P4) propositions. Only P6 received divided support. The key insights were, firstly, that transition risks and physical climate risks should be considered separately – although often mapped under the umbrella term “climate risks” – because only transition risks can be quantified and directly integrated into credit risk assessments, whereas physical climate risks only affect directly in exceptional cases. Secondly, green loan requirements do not seem as strict as proposed initially; most banks require a Taxonomy-aligned, high EPC rating, but with some country and context-specific variation. Banks also acknowledge the importance of financing Taxonomy-aligned major renovations. However, without an explicit internal mandate and dedicated resources, they tend to favour financing new buildings instead. These findings were merged with the preliminary propositions and synthesised into four green lending propositions, providing a basis for developing new theoretical frameworks on green real estate finance.

The study provides in-depth insights into the intricacies of sustainability in European residential property lending, with practical implications for lenders, investors and property valuers. While the current green lending practices align on a general level, the findings also indicate subtle differences between European markets, particularly in climate risk perceptions and the implementation of green loan criteria. As physical climate risks start to get more integrated into lending decisions and insurance terms, preventing climate-driven gentrification and “stranded homes” will become a key issue. Adaptation and resilience actions will require joint efforts between homeowners, investors, local communities and regional authorities, which raises the question of who bears the ultimate responsibility. Moreover, the great variation in access to and quality of public climate risk data within Europe further amplify regional inequalities, calling for efforts to improve transparency and comparability of climate risk data across regions (see OECD, 2025).

The study also reveals misalignments in regulatory and financial incentives in Europe, highlighting a need for an incentive system that aligns with the renovation targets of the existing building stock. As the findings indicate, the current system strongly incentivises EPC class A-rated buildings, with an unintended consequence of favouring the construction of new buildings over energy retrofits. This imbalance not only undermines the importance of decarbonising the existing building stock but also promotes preferential treatment of borrowers (or tenants) with means to buy (or rent) higher-performing – and, consequently, more expensive – assets. In addition to the socio-economic implications, new buildings may, paradoxically, also have a higher carbon footprint (Talvitie et al., 2025), which further highlights the problematics of the current prioritisation of new buildings.

Finally, with the current “green” being reduced to mere high energy rating and energy efficiency, assets have little chance to differentiate. For investors, this implies a lost opportunity to create added value. For “green” finance to have a significant environmental and financial impact, other environmental factors than energy will also need to be incorporated in a systematic, methodologically aligned manner. The absence of a significant greenium suggests opportunities to develop new financing instruments and frameworks that promote environmentally, socially and economically sustainable real estate finance.

While an abductive, inference-based research strategy enables researchers to explore, create and speculate on new ideas (Earl Rinehart, 2020), it might produce inconclusive results, limited to their unique context. Yet, if treated as a never-ending process of inquiry (Brinkmann, 2014), “a conversation” between empirical observations and theory (Earl Rinehart, 2020), abduction can provide a means to make sense of complex phenomena, without limiting the research design strictly to an inductive data collection or deductive analysis of a framework (Brinkmann, 2014). To minimise the risk of researcher bias, the study integrated multiple data sources and rounds of analysis. For example, the publicly available green funding frameworks of banks were used to confirm the exact green loan criteria, which sometimes were mentioned ambiguously during the interviews. The iterative process of constant discovery and re-evaluation of new insights also ensured that the researchers did not settle for the first plausible explanations, a typical risk in abductive methodology. For instance, P2 originally suggested both physical and transitional climate risks strongly affect lending decisions, and the first interviews aligned with this proposition. Yet, the more interviews were conducted, the clearer the differences between the two types of climate risks – and their impact on lending – became. Furthermore, the semi-structured interview protocol allowed researchers to spontaneously respond to “nuggets” of unexpected or contradicting information emerging during the interviews, adding to the quality and richness of insights. This contradiction was particularly evident in P6, which – at first – seemed to strongly divide the informants in terms of their readiness to finance major renovations. However, with deeper inquiry into the drivers and obstacles, the general sentiment started to converge towards a shared, more nuanced view where banks' internal mandate, resourcing and business focus play a major role.

This study's geographical focus on Europe may limit the generalisability of the findings to other regions with different sustainability-related regulatory landscapes and market dynamics. Environmental and decarbonisation requirements are, for example, perceived as a more critical concern in the European real estate market compared to Asia or the United States (ULI and PwC, 2025). On the other hand, given the international nature of banking and property investment, this study offers valuable insights on the European perspective for global actors and an opportunity for future research to expand the analysis to other regions. The misalignments and contradictions related to the EU Taxonomy, as identified in this study, can also inform the ongoing revisions of the Taxonomy. Furthermore, the green lending propositions suggest further research is needed to help policymakers craft stronger incentives and green metrics in real estate finance. Future research should investigate, for example, how physical climate risks could more systematically be integrated into credit assessments while ensuring affordability and preventing climate-driven segregation. Moreover, research identifying potential new environmental metrics and mechanisms in green lending will be highly relevant for developing green finance products and processes that are profitable and environmentally effective. These could include, for example, metrics and mechanisms for financing deep renovations, net carbon-positive buildings and circular and nature-positive construction.

Participants were involved under informed consent. No ethics approval was required, as the study did not meet conditions necessitating formal review (TENK, 2019).

The supplementary material for this article can be found online.