LThere are many factors that can impact the interest rate on your mortgage. These include your deposit amount and the economic state. Credit scores also play a role. Now, there’s a new factor for Dutch homebuyers: what your home is made of.
This month Triodos, a Netherlands-headquartered bank, launched what it calls a “bio-based mortgage.” Customers who buy or build homes made from natural materials like wood, flax, straw, and even fungi will pay lower interest rates than those who use other materials. Triodos states that its goal is to promote the use of plant-based materials in construction, as they are less likely to emit greenhouse gases than cement, steel and concrete.
This isn’t the first time a bank has tied interest rates to the environmental performance of buildings. As banks seek to improve their green credentials and the fight against climate change continues, so has the demand for energy efficient mortgages. These so-called “green mortgages” charge lower interest rates for homes that need less energy to run because they are well insulated or use technology to control energy use. Two-fold logic follows: Homeowners who spend less on energy are more likely to be able pay their mortgages and banks will feel safe lending them money. Offering mortgages that are cheaper for homes with higher energy efficiency makes them attractive and encourages developers, who in turn generate a greater number of houses with lower greenhouse gas emissions.
State and local government in the U.S. also have facilitated an array of energy-efficient mortgage programs. Homebuyers are able to borrow additional money for retrofits. In the Netherlands, Triodos offered the country’s first energy efficiency mortgage in 2012, and in 2020 the bank stopped offering full mortgages on all buildings with low energy efficiency ratings.
According to climate activists, reducing the energy used in houses is only one way of addressing the large part of building carbon. Huge quantities of greenhouse-warming emissions have been created and released into the environment before your house is even ready for you to move in. Those emissions from the construction industry are known as “embodied” or “embedded” carbon. They make up a staggering 11% of the world’s greenhouse gas emissions, according to the World Green Building Council.
The Netherlands is particularly interested in addressing embodied carbon. Because the country has already gotten good at building well-insulated buildings powered by renewable energy, the carbon emitted during construction accounts for a larger share of a building’s lifetime footprint than in the rest of Europe—as much as 90%, according to Triodos.
The plant-based construction methods encouraged by Triodos’ new mortgage are one option for reducing emissions from construction: where steel factories emit large amounts of carbon dioxide to produce the metal, for example, plants absorb carbon dioxide as they grow, and materials made from them can store it for hundreds of years, if treated properly. While wood is most commonly used bio-based, engineers have created new materials from algae and foams created from fungi.
In 2020, a study IOPScience by researchers in Finland found that, in a scenario where the percentage of new buildings in Europe made from wood increased from 10% in 2020 to 80% by 2040, and if wood was used in more building elements than it currently is, 0.42 gigatonnes of carbon could be removed from the atmosphere over that 20 year period—about a fifth of the E.U.’s emissions for 2020. We could also avoid thousands of tonnes of carbon dioxide generated from the production of concrete and steel.
There are concerns in the U.S. about traditional wood constructions being used for wildfire-prone homes. Advocates for wood say newer types of the material such as cross-laminated lumber perform well in fires and that increasing timber supply would help improve forest management, reduce fire risk, and increase timber market.
In the United States, the push for more plant-based material is growing. The Department of Energy awarded $39 million to companies that produce bio-based, carbon-absorbing materials in June. “There’s huge, untapped potential in reimagining building materials and construction techniques as carbon sinks,” said U.S. Secretary of Energy Jennifer M. Granholm.
Triodos in the Netherlands estimates that around 1 to 2% of all buildings made with bio-based materials are constructed. Government initiatives have already begun to raise that number. In the Amsterdam Metropolitan Area, officials made a deal for one-fifth of all new constructions to be built from wood.
To verify the bio credentials of buildings it lends on, Triodos will use environmental performance scores given to all new buildings under Dutch law, allowing the bank to give them a rating between G and A++++, before factoring in a separate measurement on the carbon storage of a building’s materials calculated by their partner Alba Concepts, a real estate consultant. For buildings with a rating of A ++++, the rate is 0.15 percent lower than for those with a B rating. Buildings rated A ++++ which also use plant-based material qualify for an additional 0.15% discount. This gives them 0.3% less than traditional buildings rated B.
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