Creditworthiness and buildings’ energy efficiency in the Italian mortgage market

26 Pages Posted: 29 Jun 2022

See all articles by Monica Billio

Monica Billio

University of Venice - Department of Economics; Ca Foscari University of Venice - Dipartimento di Economia

Michele Costola

Ca' Foscari University of Venice

Loriana Pelizzon

Leibniz Institute for Financial Research SAFE

Max Riedel

Leibniz Institute for Financial Research SAFE

Date Written: June 29, 2022

Abstract

Energy efficiency represents one of the key planned actions aiming at reducing greenhouse emissions and the consumption of fossil fuel to mitigate the impact of climate change. In this paper, we investigate the relationship between energy efficiency and the borrower’s solvency risk in the Italian market. Specifically, we analyze a residential mortgage portfolio of four financial institutions which includes about 70,000 loans matched with the energy performance certificate of the associated buildings. Our findings show that there is a negative relationship between a building’s energy efficiency and the owner’s probability of default. Findings survive after we account for dwelling, household, mortgage, market control variables, and regional and year fixed effect. Additionally, a ROC analysis shows that there is an improvement in the estimation of the mortgage default probability when the energy efficiency characteristic is included as a risk predictor in the model.

Suggested Citation

Billio, Monica and Billio, Monica and Costola, Michele and Pelizzon, Loriana and Riedel, Max, Creditworthiness and buildings’ energy efficiency in the Italian mortgage market (June 29, 2022). SAFE Working Paper No. 352, Available at SSRN: https://ssrn.com/abstract=4149430 or http://dx.doi.org/10.2139/ssrn.4149430

Monica Billio

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

HOME PAGE: http://www.unive.it/persone/billio

University of Venice - Department of Economics ( email )

Fondamenta San Giobbe 873
Venezia 30121
Italy
+39 041 234 9170 (Phone)
+39 041 234 9176 (Fax)

Michele Costola

Ca' Foscari University of Venice ( email )

Cannaregio 873
Venice, 30121
Italy

Loriana Pelizzon (Contact Author)

Leibniz Institute for Financial Research SAFE ( email )

House of Finance
Theodor-W.-Adorno-Platz 3
Frankfurt, 60323
Germany

Max Riedel

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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