Creditworthiness and buildings' energy efficiency in the Italian mortgage market

Monica Billio, Michele Costola, Loriana Pelizzon () and Max Riedel

No 352, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: Energy efficiency represents one of the key planned actions aiming at reducing greenhouse emissions and the consumption of fossil fuel to mitigate the impact of climate change. In this paper, we investigate the relationship between energy efficiency and the borrower's solvency risk in the Italian market. Specifically, we analyze a residential mortgage portfolio of four financial institutions which includes about 70,000 loans matched with the energy performance certificate of the associated buildings. Our findings show that there is a negative relationship between a building's energy efficiency and the owner's probability of default. Findings survive after we account for dwelling, household, mortgage, market control variables, and regional and year fixed effect. Additionally, a ROC analysis shows that there is an improvement in the estimation of the mortgage default probability when the energy efficiency characteristic is included as a risk predictor in the model.

Date: 2022
New Economics Papers: this item is included in nep-ene, nep-env, nep-eur and nep-ure
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:352

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