credX Financing Memo Now Features an ESG Section
ESG information is now collected for all financings. For several years, borrowers have been able to gain financing advantages through a strong ESG profile. However, what was once optional has now become mandatory: without reliable ESG data, banks can no longer provide financing.
Our financing memo, which summarizes all essential information for an initial indication and serves as a guide for due diligence, has included a dedicated ESG overview since August.
During the conception phase, we coordinated with both real estate companies and banks. The following points emerged as particularly important:
- Information for older existing properties must be obtainable with reasonable effort
- As objective data as possible, traceable development strategy/potential for older existing properties
- Compliance with the EU Taxonomy
We have developed a list of approximately 20 criteria. It is compatible with significantly more extensive questionnaires like ECORE and common certifications, but is deliberately kept much leaner and focused on real estate-specific attributes. If further information is available (e.g., scorings), we include this information in the memo.
The section is continuously being developed and aligned with the standards used by banks.
Daniela Cremer (Head of Analysis and Support) and Christian Sommer (Head of Capital Provider Support) on the ESG Module
| Why did you address the ESG topic? |
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| Christian: | For a good two years now, we have observed that banks are routinely and broadly collecting ESG criteria for real estate financings. Initially, this was very unspecific and vague, but now borrowers are expected to describe and substantiate very precisely the ESG profile of the property. |
| Daniela: | As with other financing topics, it quickly leads to a situation where each bank sets its own requirements, and borrowers provide what they have. Sometimes this works well, for example, if a new building is highly certified. But often, the parties talk past each other, reviews drag on, or are even canceled. |
| Can credX then perform an assessment? |
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| Christian: | No, each bank must conduct the rating and coordinate it with the supervisory authority. But we can provide information that helps with this. This allows banks, firstly, to provide an indication more quickly and precisely, and secondly, to conduct the subsequent review in a structured manner, based on the provided documents, swiftly and without negative surprises. |
| However, this entails significant additional work for the borrower, doesn’t it? |
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| Daniela: | That depends on how much he already incorporates ESG criteria into his portfolio/project management. Indeed, we find that quite a few are not yet addressing the topic at all or only superficially. However, in the context of a financing request, this is now unavoidable. And then it is much more efficient to complete this before approaching lenders, rather than having to provide it later or having the request rejected from the outset. The ESG overview is also a good guide for preparing due diligence or for embedding ESG criteria in lease agreements, e.g., the keyword Green Lease in commercial lease agreements. |
| Christian: | That’s right, the questions will arise regardless. Especially with the current strained staffing situation in credit departments, it is a great advantage if the request is very well prepared. This significantly increases the chance of finding a bank that will diligently review the project with the goal of providing financing. Furthermore, it is faster, and the risk of the process stalling or being canceled is much lower. |