Karel Baert is Chief Executive Officer of Febelfin, the Belgian financial sector federation, where he represents the interests of banks and financial institutions and contributes to discussions on sustainable finance, investment, digitalisation, and economic resilience. With a career spanning more than three decades, he has held senior leadership positions in banking, postal financial services, and executive search, giving him a broad perspective on both the financial sector and public policy.

Prior to joining Febelfin in 2020, Karel Baert worked at Deutsche Bank and later held executive roles at Bpost and Bpost Bank before becoming a partner at Egon Zehnder, where he specialised in leadership and talent management within the financial and public sectors. Through his current role and his involvement in European banking organisations, he actively contributes to shaping discussions on financing mechanisms, investment mobilisation, and public-private cooperation in support of Europe's economic and sustainability objectives.

BUILD UP (BUP): The alignment of commercial bank lending strategies with the Energy Performance of Buildings Directive (EPBD) is not just a regulatory compliance exercise, but a major driver for channelling massive private capital into the real estate market. How is the banking sector's effort to align credit portfolios with the EPBD translating into increased access to capital for developers and building owners embarking on large-scale renovation projects?

Karel Baert (KB): The EPBD is much more than a regulatory framework; it creates an investment agenda for the coming decades. Meeting Europe’s renovation targets will require very substantial public and private investment, and banks have a key role to play in mobilising the private component.

Financial institutions are increasingly aligning their lending and sustainability strategies with the energy transition of buildings. This is reflected in a growing range of renovation loans, green mortgages and financing solutions specifically designed to support energy-efficient renovations. The alignment of credit portfolios with the EPBD can reinforce this trend by giving financial institutions a clearer view of renovation needs, energy performance and transition risks within their real estate portfolios. Better and more consistent energy data can help lenders identify buildings requiring renovation, engage proactively with clients and develop financing solutions that support the improvement of the building stock.

For developers and building owners, this means that capital is becoming more accessible for projects that can demonstrate measurable improvements in energy performance. As the market gains experience and the quality and availability of data improve, the financing of large-scale renovation projects should be able to expand further. The key challenge is to bring technical expertise, reliable data and suitable financing together as early as possible in the project.

In Belgium, however, it is important to recognise that responsibility for building renovation and energy performance has been regionalised. Financial institutions therefore operate within three different regulatory and support frameworks, as well as three separate Energy Performance Certificate (EPC) systems. Greater consistency, reliable access to EPC data, and clear long-term regional renovation pathways would make it easier to assess projects and channel financing towards renovation.

It is also important that portfolio alignment does not encourage lenders simply to favour buildings that are already highly efficient. This might improve a portfolio’s average performance on paper without generating the renovations Europe needs. The greatest environmental additionality may come from financing a poorly performing building and supporting a credible pathway towards substantially better energy performance.

Portfolio alignment does not mean that financing becomes automatic. Febelfin does not intervene in the individual commercial, pricing, or risk policies of financial institutions, and each lender remains responsible for assessing creditworthiness, affordability, project quality, and collateral. Nevertheless, clearer public frameworks, stable incentives, and well-documented renovation plans can reduce uncertainty and help developers and building owners present more robust projects. This can facilitate access to finance and support the development of suitable credit solutions, particularly for phased or large-scale renovations.

BUP: Standardising green mortgages and renovation loans is essential to make high-performance deep retrofits competitive, providing building professionals with a strong selling point when structuring proposals for property owners. How can the standardisation of green mortgages and credit products help building professionals present more financially viable, attractive deep renovation packages to their clients?

KB: In the Belgian market, it is important to distinguish between standardising definitions and information, on the one hand, and standardising lending decisions, on the other. However, Febelfin has developed a common definition of an Energy Efficient Mortgage. This shared reference can support a consistent approach within the financial sector regarding the qualification of energy-efficient financing transactions and renovation works for individual consumers. Clarifying this concept is important to enable the sector to play its role in supporting the energy transition through household financing. Nevertheless, this notion has been developed for the specific needs of the financial sector and is intended to serve as an internal sectoral reference rather than a generally applicable classification for the wider market.

More standardised terminology and supporting information can also facilitate dialogue between contractors, property owners and lenders. A proposal that clearly distinguishes energy-related works from other renovations, links each measure to its expected EPC impact and presents the overall investment in transparent phases gives clients and lenders a more reliable basis for assessing the project. Building professionals can therefore present deep renovation packages that are easier to understand, compare and finance, while financial institutions retain full discretion over their individual lending, risk and pricing policies. 

The guidance developed by the Belgian Green Building Council for applying the EU Taxonomy to buildings is a useful example of this approach. It translates European criteria into Belgian definitions and evidence expectations, helping banks, developers, engineers and auditors work from a more consistent basis.

‘A proposal that clearly distinguishes energy-related works from other renovations, links each measure to its expected EPC impact and presents the overall investment in transparent phases gives clients and lenders a more reliable basis for assessing the project’

BUP: High upfront capital expenditures (CAPEX) and long amortisation times often stall renovation projects; blended finance and public guarantee schemes are key to reducing this initial financial barrier for those executing the works. In what ways can blended finance and public guarantee schemes be structured to directly de-risk investment and lower upfront costs for construction companies and project developers executing complex building renovations?

KB: Blended finance and public guarantee schemes can be particularly effective when they address risks that the market cannot absorb efficiently on its own. Public funds should therefore be used in a targeted manner to improve the risk-return profile of complex renovation projects, rather than to replace private financing. This can include partial guarantees covering clearly defined risks, subordinated or first-loss tranches, interest-rate support, and grants for technical studies, energy audits or project preparation.

For construction companies and project developers, an important objective is to bridge the financing gap and reduce the amount of capital that must be committed before revenues or energy savings materialise. Facilities could therefore finance eligible preparatory and construction costs, provide staged disbursements linked to verified milestones, or offer bridge financing until grants and subsidies are paid. Guarantees may also help address performance, completion or aggregation risks, provided that responsibilities, eligibility criteria and claims procedures are clear and proportionate.

To attract private capital, these schemes should be simple, predictable and scalable. Standardised documentation, reliable technical data, independent verification of expected energy performance and coordination between public authorities, lenders and building professionals can reduce transaction costs and facilitate due diligence. In Belgium, coherence between the three regional support frameworks would further improve accessibility and limit administrative complexity.

At the same time, public support does not make a project automatically bankable. The most effective schemes are therefore those that allocate risks to the parties best able to manage them and combine public support with technically sound, well-documented and financially sustainable renovation plans.

BUP: The fragmentation of small-scale residential renovations creates high transaction costs; bridging the gap between technical construction aggregators (like one-stop shops (OSS)) and banking pipelines is crucial to scale the market. How can commercial banks and building sector actors collaborate through OSS to effectively aggregate small-scale renovation projects into investable, high-volume portfolios?

KB: One-stop shops represent a real opportunity to guide, inform, and support homeowners throughout their renovation journey. Starting a renovation can be complex, particularly when it comes to understanding the logical sequence of the works, identifying the right professionals, and navigating the various administrative and financial steps. A renovation candidate should therefore be able to approach a single structure that can assess the project as a whole and provide tailored guidance. The OSS can help determine which works should be carried out and in what order, raise awareness of the expected energy benefits, and follow up on the progress and quality of the works. It can also inform the homeowner about the grants, incentives and subsidies available in the relevant Region.

Financial guidance is equally important. Depending on the nature and scale of the project, the available options may include mortgage financing, consumer credit, public support or a combination of these instruments. By bringing together technical advice, administrative assistance, regional support measures and information on financing possibilities, the OSS can help homeowners develop a coherent and realistic renovation pathway.

This integrated approach can give renovation candidates greater peace of mind and a genuine sense of being supported from the initial assessment through to completion of the works. It can also help generate better-prepared and more clearly documented projects, thereby facilitating dialogue with building professionals and financial institutions. 

The Belgian LIFE BE FREE project provides useful experience in this respect. It brings together the financial sector, local authorities, construction actors and transition organisations, and has examined models involving co-ownership associations, neighbourhood renovation, the private rental market and social credit. Such partnerships can help turn dispersed renovation intentions into better-prepared project pipelines.

‘By bringing together technical advice, administrative assistance, regional support measures and information on financing possibilities, the OSS can help homeowners develop a coherent and realistic renovation pathway’

BUP: To avoid asset devaluation and capture the 'green premium' of a renovated building, the financial sector must rely on standardised technical metrics, such as Energy Performance Certificates (EPCs) and Renovation Passports provided by building professionals. What standardised data tools and performance metrics must the construction sector provide to help lenders accurately quantify the green premium of renovated buildings and prevent the devaluation of real estate assets?

KB: In Belgium, responsibility for building renovation has been devolved to the three Regions. As a result, the financial sector must navigate three different regional approaches and three separate EPC rating systems. Greater harmonisation of EPC scales and labels across the three Regions would therefore provide a clearer and more consistent basis for assessing renovation projects and their impact on property value.

At the same time, construction and renovation professionals must be able to provide detailed, well-documented price offers. This would enable lenders to distinguish clearly between energy-related renovation works and other improvements. In practice, contractors often streamline the information included in price offers to save time, but this can make it more difficult for the financial sector to assess the nature of the works and their expected energy impact.

The concept of a green premium should be used carefully. Energy performance can influence operating costs, marketability and exposure to future renovation requirements, but property value also depends on location, building quality, market conditions and other characteristics. The objective should therefore not be to apply a universal premium, but to provide valuers and lenders with sufficiently granular and comparable data to assess the effect of energy performance in different market segments.

In addition to harmonising EPC scales and labels, a degree of standardisation is therefore needed regarding the information to be included in price offers. Clear descriptions of the works, their energy-related components, their costs and their expected contribution to the post-renovation EPC result would give lenders a more reliable view of the project and help them assess the green premium more accurately.

BUP: Delivering energy efficiency to low-income segments and social housing is a priority under EPBD, but it requires tailored lending frameworks that allow developers and housing providers to operationalise these interventions. How can targeted green lending frameworks be optimised to empower building operators and social housing providers to execute renovations for low-income and vulnerable households?

KB: An inclusive renovation wave is essential. Some of the greatest social and energy benefits can be achieved among vulnerable households and in social housing, where buildings often have the lowest energy performance, and occupants are particularly exposed to high energy costs.

In Belgium, social credit falls within the scope of public support rather than the financial sector. It is therefore crucial that the available public funds are allocated selectively, proportionately, and to the households and projects for which they are genuinely intended. Clear eligibility criteria and appropriate safeguards are needed to ensure that limited public resources reach the target groups and support renovations that deliver meaningful energy improvements.

For these groups, green financing frameworks should be combined with supporting public measures such as guarantees, grants, subsidies or interest-rate support. This can make renovation financing accessible to households and social housing providers that would otherwise have difficulty obtaining sufficient investment capital. The precise combination should reflect the beneficiaries' circumstances, the affordability of the project and the expected energy impact.

Simplicity is equally important. Social housing providers, local authorities, OSS, building professionals and financial institutions should cooperate to offer integrated pathways that bring together technical guidance, public support, suitable financing and project implementation. Vulnerable households should not be expected to navigate multiple complex procedures on their own.

The energy transition of the building stock will only succeed if the most vulnerable groups can participate. This requires a coordinated effort by the public sector, the construction sector and the financial sector, with each actor contributing within its own responsibilities. Financial institutions remain responsible for their individual commercial, pricing and risk policies, while public authorities are responsible for defining and targeting the social support instruments.

In practice, this calls for a layered model: grants for the portion that cannot reasonably be financed, public guarantees or concessional resources for additional risks, and commercial lending for the part supported by reliable repayment capacity. This allows private capital to complement public intervention without shifting inappropriate financial risks onto vulnerable households.