Swiss Mortgages: Investing in Energy-Efficient Buildings for Climate Goals and Attractive Returns

If all buildings were converted to the Minergie standard, 30% of energy could be saved in Switzerland. (image pd)

By financing sustainable construction projects, Swiss mortgages can make their contribution to achieving climate goals. They also offer an attractive additional return compared to bonds.

The emissions from buildings – mainly in the form of carbon dioxide (CO2) – arise primarily from the consumption of fossil fuels, for example when heating or preparing hot water in residential and commercial buildings. The Federal Office for the Environment estimates that buildings in Switzerland are responsible for around 40% of total energy consumption and around a quarter of the country’s current annual greenhouse gas emissions. The majority of the environmental impact of buildings arises during the operational phase.

The majority of buildings are heated with fossil energy

The majority of the approximately 1.8 million residential buildings in Switzerland were built between 1949 and 1994. 56.8% of these buildings are heated with fossil energy sources (heating oil and gas)1). Upcoming renovations can make a significant contribution to reducing emissions. For example, if all buildings were renovated to Minergie standards, energy consumption per person could be reduced by over 30% compared to today. In addition, by replacing fossil heating systems with renewable heating systems, a further 30% of current CO2 emissions can be saved in operation2). There is therefore increasing interest among property owners in optimizing energy efficiency and reducing the CO2 footprint of their properties.

Contribution to reducing emissions

Financing renovations that, for example, improve energy efficiency helps to reduce greenhouse gas emissions and measurably slow down climate change. With a total volume of more than CHF 1,200 billion3), the Swiss mortgage market offers not only banks but also great potential for alternative mortgage providers such as Swiss insurance companies, pension funds or other institutional investors.

In 2021, the Swiss Life Investment Foundation launched the “Mortgages Switzerland ESG” investment group, the first sustainable Swiss mortgage fund for pension funds and the “Swiss Life ESG Mortgage Fund” for qualified investors. These invest in mortgages that finance sustainable and energy-efficient buildings as well as energy-efficient renovations. This makes a measurable contribution to curbing climate change.

Mortgage borrowers and investors benefit hand in hand

This creates benefits for both mortgage borrowers and investors. The former, which are suitable for the investment group or its target funds, benefit from reduced mortgage conditions and lower operating costs as well as from a higher marketability of their properties, as they anticipate and address future climate risks – especially any regulatory requirements. Investors benefit from an attractive risk-return profile. Through the “Mortgage Switzerland ESG” investment group, this asset class is made accessible to Swiss pension funds and, with the Swiss Life ESG Mortgage Fund, to institutional investors. This means that there is no need to set up your own sales and administration organization for investing in sustainable mortgages.

In addition to the ESG aspect, Swiss mortgages impress with a constant additional return compared to bonds denominated in Swiss francs, even in a higher interest rate environment. In addition, all mortgages are secured by mortgages and the underlying properties are mortgaged with a maximum of 80%. Although Switzerland has the highest household mortgage debt in an international comparison, the market is considered resilient. This is the finding of a current study by the International Monetary Fund4). According to the study, the Swiss mortgage market currently has the lowest probability of loan default among 30 European mortgage markets analyzed. In addition, the risk for investors is further reduced because the borrower has to be liable with his full income and assets.

With the Swiss Life Investment Foundation you will find the advice and product range you require. You can find more information on our website www.swisslife.ch/anlagestiftung or about ours contact person.

1) But / https://www.bfs.admin.ch/bfs/de/home/statistiken/bau-wohnungswesen/gebaeude/energiebereich.html
2)https://www.bafu.admin.ch/bafu/de/home/dokumentation/umweltbericht/umweltbericht-2022.html
3)https://moneypark.ch/news-knowledge/mortgages-and-interests/mortgage-market-switzerland-2022-growth-despite-interest-rate-rise/
4)Valderrama et. to the. 2023

This publication contains advertising. This document has been prepared with the greatest care and to the best of our knowledge and belief, but we give no guarantee as to its content or completeness and disclaim any liability for losses resulting from the use of this information. This publication does not constitute an invitation or a recommendation to purchase or sell financial instruments, but serves solely for information and advertising purposes. This document contains “forward-looking statements” that express our views and expectations as of a particular date. Various risks, uncertainties and other influencing factors can cause actual developments and results to differ significantly from our expectations. “Swiss Life Asset Managers” is the name for the asset management activities of the Swiss Life Group. More information at www.swisslife-am.com. Source: Swiss Life Asset Managers. All rights reserved. Contact: info@swisslife-am.

2023-12-22 19:22:18
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