The Dutch government is aligned with the 2015 Paris Agreement’s target to reduce CO2 emissions by 55% by 2030 and achieve net zero emissions by 2050 compared to 1990 levels. By taking measures to improve the home energy efficiency – such as better insulation, efficient heating systems and the use of renewable energy sources – significant reductions in emissions can be achieved. These measures not only benefit the environment but also help homeowners save on energy bills.
However, it is estimated that a quarter of the current Dutch housing stock has a poor energy label. At the current rate of improvement, the average house will not have an energy label A until 20551.
Dynamic Credit Group, a BNP Paribas Asset Management partner, believe that improving energy-inefficient homes provides greater benefits than simply financing properties that are already energy-efficient. Beyond the positive sustainability benefits, it is also a compelling business case for homeowners, particularly to those with lower energy labels. Implementing sustainability measures reduces homeowners’ monthly expenses and decreases exposure to energy price fluctuations.
Investing in Dutch mortgages presents a compelling opportunity for investors. Dutch mortgage loans can potentially offer a high relative value versus other fixed income products with similar risk levels. The Dutch housing market’s strong fundamentals further support the investment thesis. We believe the shortage of housing is expected to persist due to supply chain constraints, lack of central coordination and environmental challenges. While on the demand side, there is restricted access to social housing and a constrained non-regulated rental sector. Investor protection is another key advantage, with the Dutch market characterised by stringent underwriting criteria and stable lending standards as mandated by law. For investors, holding an allocation to Dutch mortgages backed by more energy-efficient properties can lead to a more resilient portfolio with an improved environmental profile.
Journey of a borrower: Applying for a mortgage with an automated improvement plan
A Dutch couple is looking to buy a house with an energy label E, which is considered energy inefficient. After applying for a mortgage with Dynamic Credit, through an independent financial adviser, an improvement plan is automatically generated using an innovative software. This software utilises multiple sources to determine which energy-saving measures are advisable, the required investment and the expected savings after implementation.
After reviewing the plan with the independent financial advisor, they agree to proceed. The requested mortgage amount is then adjusted to cover the required investment, and the application is processed as usual.
Once the mortgage deed is signed at the notary, the borrowers receive automated communication with practical tips and guidance on the realisation of the proposed energy-saving measures.
The results for implementing sustainability measures:
- Homeowner: Reduced monthly expenses and decreased exposure to energy price fluctuations
- Investors: A more resilient portfolio with an improved environmental profile
Furthermore, improving the energy efficiency of the Dutch housing stock helps reduce carbon emissions, as housing accounts for a significant share of them.
Range of solutions
When investing in Dutch mortgages, Dynamic Credit offers either a tailored investment approach or a pooled fund solution. With tailored investments, investors have the flexibility in choosing the optimal mix of mortgage exposure to suit their appetite for risk and duration.
Multi-channel strategy
Dynamic Credit offers borrowers the choice of applying for a mortgage either directly through an online application module or through an independent financial advisor, ensuring full market coverage.
[1] Source: Calcasa 2021 Q1 WOX kwartaalbericht.
[2] Source: Dynamic Credit, December 2024.
Important information
Marketing communication. For Wholesale Investors only.
This information is distributed to wholesale clients only in Australia by BNP PARIBAS ASSET MANAGEMENT Australia Limited ABN 78 008 576 449, AFSL 223418. None of the funds referred to in this material are available in Australia & New Zealand, and so this material is provided to wholesale clients for information purposes only.
Past performance or achievement is not indicative of current or future performance. Performance is calculated net of fees unless otherwise stated.
Any views expressed here are those of the author as of the date of publication, based on available information, and subject to change without notice. This material does not constitute investment advice.
Investments are subject to market fluctuations and the risks inherent in investments in securities. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial investment. There is no guarantee that the performance objective will be achieved.
Investments are subject to market fluctuations and the risks inherent in investments in securities. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial investment. There is no guarantee that the performance objective will be achieved.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) INVESTMENT RISK: The lack of common or harmonized definitions and labels integrating ESG and sustainability criteria at EU level may result in different approaches by managers when setting ESG objectives. This also means that it may be difficult to compare strategies integrating ESG and sustainability criteria to the extent that the selection and weightings applied to select investments may be based on metrics that may share the same name but have different underlying meanings. In evaluating a security based on the ESG and sustainability criteria, the Investment Manager may also use data sources provided by external ESG research providers. Given the evolving nature of ESG, these data sources may for the time being be incomplete, inaccurate or unavailable. Applying responsible business conduct standards in the investment process may lead to the exclusion of securities of certain issuers. Consequently, the Sub-Fund’s performance may at times be better or worse than the performance of relatable funds that do not apply such standards.