What property owners need to know about CRD6/L193, ESG risk and the new lending rules.

Recent changes to Danish financial legislation have raised concerns among property owners, particularly small and medium-sized players, about what banks will now require in terms of ESG data. 

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Some have interpreted the new rules as the beginning of a strict, data-heavy era, where access to financing will depend on complex sustainability reporting. But that interpretation is somewhat sensationalist.  

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ESG risk ≠ ESG reporting

As of July 1, Danish banks are required to integrate ESG risk into their credit assessments, as part of the implementation of EU legislation (CRD6). This means that environmental, social and governance factors – such as energy efficiency, carbon emissions, and climate resilience – must be considered when evaluating a property or portfolio.

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However, this is not the same as requiring landlords or property companies to submit extensive ESG reports in order to qualify for a loan. As Christina Krath from Danske Bank, one of comundo’s partners, recently said:

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“We’re not interested in burdening companies with unnecessary administrative tasks by requesting ESG data unless it’s genuinely relevant to assessing our risks.”

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In other words: ESG will be part of the equation – but banks are not coming with a clipboard full of forms unless the risk profile calls for it.

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Why the real estate sector is in focus 

The real estate sector is, however, under closer scrutiny, and with good reason. Buildings are a major source of energy consumption and emissions, and upcoming regulations (such as CO₂ taxes and stricter energy labelling rules) may affect the long-term value and liquidity of certain properties.

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That means banks will increasingly want to understand:

• The borrower’s overall transition plan for their property portfolio and the (financial) ability to execute the needed actions
• The energy profile of the building (e.g. heat source, insulation, energy label)
• Planned renovations or upgrades to reduce emissions or improve efficiency

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In many cases, banks already have access to basic property data or use sector benchmarks. But if the available data is insufficient or the property carries a higher risk (e.g. buildings with poor energy performance), additional questions may arise.

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What this means for property owners

There is no need to panic – but there is a clear signal: Understanding your property's sustainability impact is increasingly relevant for financing. There are several actions property owners can take in order to prepare.

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Here are three of them:

• Know your energy label and what it implies for future regulation and costs
• If possible, have a plan for energy efficiency improvements, especially for older assets
• Be ready to discuss the financial logic of upgrades, both in terms of risk mitigation and value creation

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You don’t need a 50-page sustainability report. But you do need to be able to explain how your business fits into a transitioning economy and meets changing demands from tenants, partners, and future buyers.

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Banks are not interested in bureaucracy for its own sake. No one wants more paperwork. What they need is visibility into whether a property is likely to retain value and perform under future regulatory and market conditions.

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A proportionate approach is possible

Not every business needs to scramble for piles of ESG paperwork. Danske Bank has said they have no interest in overburdening companies with ESG data requests if they do not need them to evaluate their risk. 

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The fear that ESG requirements will lead to an "or else" approach to financing is overstated. Danish banks, Danske Bank among them, have been clear that their goal is not to overwhelm borrowers with new demands, but to ensure sound, forward-looking lending practices. As Krath explains:

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“The important thing is that banks apply the legislation in a way that promotes competitiveness – not by drowning businesses in data requirements.”

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The real estate sector is a critical part of the green transition. But for most property owners, this transition will be manageable and potentially beneficial if approached with clarity, planning and partnership with lenders.