Regulatory compliance

Regulatory Compliance, Governance and Strategic Alignment with EU Sustainable Finance Mandates

The SMARTER Finance for EU (SMARTER4EU) project has been designed and implemented to
ensure regulatory compliance and alignment with the EU Taxonomy and Sustainable Finance
framework, which is dynamic and evolving. This alignment makes the program credible for banks, effective for reaching climate goals, and trustworthy for homeowners across Europe.

How the Green Homes & Green Mortgage programmes meet or exceed EU Taxonomy definitions?

The SMARTER4EU Green Homes & Green Mortgage programmes are fully aligned with the EU
Taxonomy's technical screening criteria for new construction and acquisition and ownership. In
SMARTER4EU, participating partners reviewed and benchmarked national green home certification systems and design criteria against the Taxonomy's Substantial Contribution and "Do No Significant Harm" (DNSH) provisions. Where necessary, improvements were proposed to ensure alignment of national green standards.

SMARTER4EU conducted in-depth assessments of existing tools and certifications in use across
partner countries. The work included gap analyses against Taxonomy criteria, particularly for wholelife carbon, resource efficiency, and pollution prevention. The outcome is a robust roadmap for full compliance across countries involved in SMARTER4EU.

SMARTER4EU created a report on Aligning with EU Taxonomy & Level[s] for each Implementing
Partner country on their residential green certification’s alignment /status and path to meet or
exceed the requirements of the EU Taxonomy for Sustainable Activities and the Level[s] framework.

Importance of the EU Taxonomy and Certification in the Current Context

What is the process to convert a certified green residential or other building project to a certificate of EU Taxonomy compliance useful for the bank or institutional investor?

Through the efforts undertaken by the SMARTER4EU initiative, both the national Implementing
Partners and the S4EU-ECoE offer independent third-party verification for EU Taxonomy (EUT)
compliance through an Environmental, Social, Governance (ESG) verification service. This covers two main routes: the national Implementing Partners' certification for residential properties (e.g. Green Homes, Home Performance Index, GBCe VERDE, etc.), and direct EUT assessment for individual buildings or entire portfolios; whether they're industrial, commercial, or public sector.

The decision as to which entity - the national Implementing Partner or the S4EU-ECoE - completes this verification directly is determined by 1) if the Implementing Partner has demonstrated suitable financial independence from the certification revenue versus other revenue sources that may impede good governance in fact or appearance and 2) if an Implementing Partner chooses to outsource the function to the S4EU-ECoE based on their chosen areas of focus. The intent is to localize the process for all partners with the S4EU-ECoE providing an audit and quality assurance role while also assuring this important verification process is provided to Implementing Partners' not yet ready to assume this role due to the stage of national market development.

For green residential projects, developers submit both the certification and the EUT compliance
evidence together. It's a streamlined process since the national Implementing Partner's certification already addresses the Taxonomy requirements; an upgrade completed through the SMARTER4EU activities.

A strict separation between consultancy and verification is maintained which is essential for
credibility. The ESG or EUT consultant does the groundwork: preparing all the compliance
documentation needed to be done to meet EUT requirements.

For commercial, industrial, or public buildings, the consultant uploads all the evidence through a
dedicated platform. The Implementing Partner or S4EU-ECoE reviews the documentation
independently as a neutral third party with no stake in whether the project passes or not. The EU
Taxonomy criteria is checked ensuring that the project makes a substantial contribution to climate objectives, respects the "Do No Significant Harm" mandate across all six environmental objectives, and verifying that minimum safeguards for corporate compliance are in place.

When all criteria are verified, a certificate confirming full compliance is issued. Financial institutions and institutional investors can use this certificate as proof of independent verification for EU Taxonomy compliance and contributions to their "Green Asset Ratio"; the share of a bank’s assets that are aligned with the EU Taxonomy for Sustainable Activities. If a commercial project meets some but not all of the criteria, a certificate may still be issued but it will clearly state "partial alignment" and break down the status for each relevant objective. This gives banks transparency about exactly where the project stands.

Independent Verification of the EU TAX alignment certificate

The Level(s) framework

Level(s) is a voluntary framework developed by the European Commission to assess and report on the sustainability of buildings throughout their full life cycle—from design and construction to
operation, renovation, and end-of-life. Part of the European Green Deal and circular economy
initiatives, it uses a common set of core indicators to measure key impacts, helping professionals
identify issues, future-proof designs, and align with EU objectives such as reducing emissions,
improving resource efficiency, and increasing climate resilience.

Structured around six macro-objectives (greenhouse gas emissions, resource use and circularity,
water, health and comfort, adaptation, and life cycle costs) tracked by 16 indicators, SMARTER4EU selected Level(s) due to its open-source nature and fitness-for-purpose in evaluating certification schemes; particularly beyond energy performance. It applies to new and renovated buildings (including residential) and integrates with tools like the EU Taxonomy and green public procurement. SMARTER4EU partners have participated as pilot testers for the Level(s) framework development and roll out.

GHGM programmes have integrated selected Level(s) indicators to reinforce environmental and
economic credibility, especially for lifecycle carbon assessment (macro-objective 1) and costperformance over time (macro-objective 5). Within SMARTER4EU, partners assessed the extent to which national rating tools already embedded Level(s) principles and undertook targeted alignment actions. A digital toolkit was developed to facilitate this integration and allow certification bodies to benchmark project-level data against Level(s) indicators.

How does the S4EU-ECoE ensure good governance?

SMARTER4EU has prioritized strong governance mechanisms at both the consortium and national programme levels. Each implementing partner follows clear procedures for tool updates, stakeholder engagement, and decision-making. A key role of the S4EU-ECoE is to provide oversight, ensure consistency, and facilitate capacity building.

Advisory boards composed of national experts and stakeholders supported the continual evolution of GHGM programmes in line with EU guidance. Periodic reporting, external reviews, and open access dissemination of methodologies help ensure transparency and trust.

SMARTER4EU created a Good governance workshop outcomes, gaps and pathways and best
practice report. This research identified European best practice and mapping the governance for
each implementing partner through a survey to identify gaps / areas of improvement. Guidance on next actions to make the governance process robust was produced.

In addition, guidance in the form of a Quality Assurance Manual for Implementing Partners for
ensuring good governance practices within the organization with a particular focus on the
Certification Processes; bringing a greater structure to how a green homes certification programme is delivered and ensures that all areas that need to be considered are considered.

Verification of financial models – energy and cost data

Banks, investors, project developers and homebuyers rely on the promised benefits of reduced
operating costs of green homes. The S4EU-ECoE has an ongoing role to facilitate the collection of energy and cost data to test and adjust financial models and assure promised energy security and climate impact to all stakeholders.

An important innovation in SMARTER4EU is the systematic collection of post-occupancy energy and cost data to validate performance assumptions. Partners are working with banks and developers to gather real data on energy consumption, indoor comfort, and maintenance costs.

SMARTER4EU created an Energy Data Collection Plan document providing strategies to assist new and existing Implementing Partners to ensure/improve collecting and submitting actual energy and non-energy green performance data from certified residential projects. The result is to inform current banking partners of the actual versus modeled performance of their loan portfolios of green versus non- green projects.

European Committee for Standardization (CEN) standards

SMARTER4EU created a report with recommendations on Adjustments incorporating CEN and
related standards with road map.The research includes the new SMARTER4EU partners and builds on the work done in the prior Smarter Finance for Families project – adding in the EU Taxonomy and its relationship with CEN standards - addressing:

How the certification of eligibility for Green Homes renovation and new construction projects can be informed and aligned with CEN and other standards,
How existing green homes certification tools can be updated and submitted for recognition,
How modification of green homes certification can be altered over the longer term toaccommodate the objectives.