BBVA SUPPORT TO HOME OWNERS ASSOCIATIONS

The project consists of a Delinked Risk Sharing operation whereby BBVA will use the proceeds to finance new Climate Action and Environmental Sustainability eligible investments in Spain, in line with the EIB's Action Plan for Affordable and Sustainable Housing.

The aim of the project is to support Spanish homeowners' associations, small and medium-sized enterprises (SMEs), MidCaps, and private individuals by financing energy-efficient building refurbishments and the construction of nearly zero-energy buildings (NZEBs+). The new portfolio will primarily focus on integral refurbishments undertaken by homeowners' associations, as well as green mortgages for private individuals and NZEBs+ construction by SMEs and MidCaps.

The proposed operation is a EUR 150m EIB guarantee to enable BBVA to unlock EUR 300m for sustainable housing in Spain. BBVA will finance mainly building renovations for homeowners' associations, green mortgages for households, and near-zero-energy buildings for SMEs and MidCaps. These activities will be carried out by private individuals, homeowner associations responsible for building refurbishment, SMEs and MidCaps.

The operation supports the EU's and Bank's priorities in the energy sector, the EIB's climate action objectives, and will contribute to the achievement of Spain's National Energy and Climate Plan. The operation enhances access to finance for final beneficiaries for Climate Action related investments and improves financing conditions for them through long term tenors and favourable financing conditions. The operation is aligned with the European Investment Bank's Action Plan for Affordable and Sustainable Housing.

Financial intermediaries, including BBVA, are pivotal in this transition, as financing is crucial for unlocking the investments needed for its realisation. The operation contributes to reducing the market failures linked to asymmetric information and split incentives between property owners, who undertake energy efficiency investments, and tenants, who pay the energy bills. Thermal comfort in the dwellings is ensured while households' energy costs/consumption are kept to minimal levels.

Spain's building stock is very old and energy inefficient. Most buildings date from the 1980s and have an energy certificate rating of F or G. Rehabilitation activities are often delayed due to a lack of major incentives from regional governments. Approvals for renovations in large multifamily buildings are also difficult. For example, in Madrid only 20% of proposed renovations in large apartment blocks are approved within a year. Spain's investment needs are significant, as outlined in the National Energy and Climate Plan, which allocates around EUR 35 billion to building renovations by 2030. However, the current renovation rate remains below 1%, far short of the approximately 3% required to achieve timely decarbonisation.

To address these challenges, policy changes and new incentives could play a crucial role in increasing the renovation rate. Enhanced government support, streamlined approval processes, and targeted financial incentives for homeowners and associations may help close the gap between current activity and the levels needed for Spain to meet its energy and climate targets. By encouraging more renovations, Spain can make meaningful progress toward improving energy efficiency and reducing carbon emissions in its ageing building stock.

The Financial Intermediary is deemed to be capable of implementing the operation considering its overall experience. The operation is expected to be both financially and economically viable, with a good economic rate of return (ERR) and good broader social benefit.

The project would not have been carried out (to the same extent) without the EIB support. At project implementation and monitoring the EIB will perform ad hoc interventions, e.g. monitoring missions, to ensure compliance with Annual PPR.

A part of the project is located in transition regions (51% approximately, ex-ante calculation based on GDP) and the project will stimulate the local construction industry.

The proposed operation falls within the scope of the EIB's Environmental and Social Standards - "Standard 11 Intermediated Finance". The Borrower / Financial Intermediary has adequate capacity, systems and processes in place for identifying, assessing, managing and monitoring environmental, climate and social (ECS) risks related to the potential sub-projects benefitting from EIB support. The Final beneficiaries will be required to comply with applicable national and EU legislation in respect of environmental and social matters, as appropriate.

In accordance with the EIB's policy to ensure that sub-loans comply with the EU acquis, in particular in the fields of environment and public procurement, BBVA has to to take all the requisite measures to ensure that the environment and procurement procedures carried out by the final beneficiaries, will comply with the relevant EU legislation and the applicable national legislation, provided that these are in line with EU rules.