What is the EPBD and how will it affect construction and real estate?


Our industry is engaged in an important dialogue to improve sustainability through ESG transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.

Few pieces of legislation will be as impactful or wide-reaching as the Energy Performance of Buildings Directive (EPBD).

The newly revised directive provides much-needed clarity about the changes needed to our built environment in order to meet the EU’s environmental goals by 2050. Affecting both new construction and the renovation of existing buildings, the scale of this legislation is huge. According to EU data, eighty-five percent of EU buildings were built before 2000; of those, seventy-five percent have poor energy performance. For example, in Ireland alone, we anticipate that approximately fifty-one percent of non-domestic buildings will be affected by this directive through the introduction of minimum energy performance standards by 2030.

But while the directive offers a clear path forward, it also incites urgency. To achieve interim targets set for 2030 and 2040, developers and investors need to work quickly. If they do not, they risk falling behind, missing out on crucial resources, and suffering financial consequences.

In this article, we cover what the revised EPBD means for the construction and real estate industry, its developers, investors, and funders, and why it’s essential to act now.

What is the EPBD and what are the most recent changes?

The EPBD is part of a regulatory framework that supports the EU’s goal to be climate neutral by 2050. Initially created in 2002, it is an evolving piece of legislation that has been updated several times. The most recent revision was passed in early 2024 and is now in the process of being formally adopted.

As buildings currently contribute over one-third of the EU’s energy-related greenhouse gas emissions, there is a significant opportunity—and responsibility—to decarbonize our building stock and improve energy efficiency as we work towards a greener environment. This directive describes how to do so, aiming for emission reductions of at least sixty percent in the building sector compared to 2015.

Some changes in this latest iteration of the EPBD include:

  • Improved Energy Performance Certificates (EPCs) based on common criteria across the EU.
  • A gradual phase-out of boilers powered by fossil fuels, with the aim of a complete phase-out by 2040.
  • Making zero-emission buildings the standard for new buildings, with zero on-site emissions from fossil fuels and solar-readiness where feasible.

Overall, this updated directive gives people clear, actionable criteria on what they need to do to bring new and existing buildings into line with the EU’s requirements so we can achieve key environmental objectives. It removes ambiguity and gives developers and investors the details they need to understand emerging sustainability requirements, put them into action, and promote green investment.

Why the EPBD requires urgent action

The EU predicts that this directive will spark a renovation boom as people seek to bring buildings up to these new standards by the allocated deadlines. With so many buildings affected across the European Union, forward-thinking developers and investors must act quickly to future-proof their assets, minimize risk, maintain the value of their investments, and reduce their environmental impact.

Here is why it is so important to act now.

1. Approaching deadlines mean time is of the essence

The need for more sustainable building practices is critical, and it requires immediate action—from practical, financial, and environmental perspectives.

In addition to the long-term objective of reaching climate neutrality by 2050, the directive also sets out shorter-term deadlines. In particular, member states must renovate the worst-performing buildings sooner, including improving the worst-performing twenty-six percent of non-residential buildings by 2033.

These are short timelines, particularly if you are working with multiple properties across the EU. Since different member states have different needs—based on factors like their existing building stock and climate—the directive enables countries to outline their own ‘national trajectory’ based on their individual circumstances.

However, if you wait for every complexity to be ironed out before taking action, you risk falling further behind. Instead, you should work with a trusted, experienced, and proactive consultancy partner, especially one with experience across Europe who can navigate the individual requirements of specific countries.

2. Resources are scarce—and competition for them will only grow

Given the scope of work needed, both from consultancies and on-site staff, we anticipate that competition for limited resources—like labor and expertise—will quickly grow.

Demand may exceed supply, particularly for top-notch talent. And while there is a growing pipeline of new tradespeople getting certified all the time, situations like these require the kind of intricate knowledge that only comes with experience.

Whether you’re looking for electricians, plumbers, and scaffolders to carry out the work; or consultants with the necessary nuance and expertise to advise and manage your projects, clients should seek to lock down their consultancies and tradespeople sooner rather than later—before they are too busy.

3. Minimize risk and protect your investments

Developers and investors need to make the necessary upgrades in time to maintain the ability to sell or rent their assets. If they do not, there is a significant risk of financial losses.

Investors may also want to streamline their portfolio by offloading assets that they are not willing or able to sink further investment into. As time goes on, these lower-grade assets will depreciate in value and become even harder to sell as demand for them drops—so it is important to work quickly in identifying which buildings to keep and which to divest.

Contrastingly, the demand for green investments only continues to rise. The improvements you make based on the EPBD will strengthen your assets’ value now and well into the future, making them more appealing to investors and funders alike.

Indeed, we have seen that developers who have been proactive with EU taxonomy alignment are now in a fantastic position with these new EPBD revisions. This just highlights the ongoing and tangible benefits of adopting sustainable practices and being proactive with ESG initiatives; not only is it better for the environment, but it is better for your investments, too.

How to start improving your assets in line with the EPBD

If you are renovating buildings with the EPBD in mind, follow these key stages: assess, analyze, and take action.

Step 1: Evaluate your portfolio

Assess your portfolio against the mapping of the EPBD to understand how your assets currently rank within the revised EPCs. Doing this across portfolios of mixed assets in multiple jurisdictions can be challenging, but it is important when developing the overall strategy to achieve the new minimum bar set by the EPBD.

Step 2: Perform a high-level analysis of affected assets

Analyze your assets, their location, and their real-life performance. Compare your existing assets to the standards required by the EPBD to identify which ones you want to fix (for example, those that need minor work or present the biggest investment opportunities) and which ones you do not.

Step 3: Upgrade or offload assets

Make a plan to improve the EPC of assets you are keeping; work to quickly offload assets that you are not.

Can it really be as simple as following three easy steps? Yes and no. There is a great deal of complexity within the directive, so choosing the right consultancy partner to help you make sense of it (and apply it to your unique situation) is crucial. But by engaging trusted experts with experience across multiple EU member states, you can massively streamline the process and improve your buildings—and portfolio—with confidence.

Get ahead of the renovation wave by starting now

The EPBD outlines exactly what is needed to reach key milestones—as well as interim checkpoints—on our collective journey towards climate neutrality. This environmental goal impacts all of us, and the improvements brought about by the revised directive will be a phenomenal step in the right direction. But it also means that a huge disruption is on the horizon, as developers and investors scramble to quickly secure the resources and talent required to bring these changes to life.

Our recommendation is to start kicking off this process now, before it is too late. By securing the resources, talent, and expertise you need sooner rather than later, you can protect your investments and make a real environmental impact.

This article was written by Ciaran O’Leary, Head of Sustainability, Catalyst.

Learn more about the impact of changing regulations on the real assets space

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