ESG Reporting in Mortgage Lending: What’s Changing in 2025
The world of mortgage lending is undergoing a quiet but significant transformation. While lending decisions have traditionally hinged on creditworthiness, property value and interest-rate risk, in 2025 a growing number of lenders are factoring in environmental, social and governance (ESG) dimensions — and reporting obligations are increasing. Below we explore what’s changing, why it matters, how mortgage-lenders (and borrowers) should prepare, and the implications for the mortgage ecosystem.
1. Why ESG matters more in mortgage lending
Several inter-locking pressures are driving the shift:
Regulatory momentum: ESG disclosure frameworks are becoming more robust globally. For example, companies are being required to report on non-financial metrics such as climate risk, social impacts and governance structure.
Climate and physical risk exposure: Real estate is exposed to climate events (flooding, fires, storms) and transition risks (regulation, stranded assets). Lenders are increasingly aware that their mortgage portfolios are vulnerable to these risks.
Investor and stakeholder expectations: Investors, debt-markets and rating agencies are asking more questions about ESG credentials of financial institutions and their lending books. This puts pressure on lenders to measure and disclose.
Competitive advantage: Lenders recognise that borrowers with strong ESG/green credentials (e.g., energy efficient homes, sustainable building materials, strong governance) may present lower risk, or may access better terms.
Evolution of green finance instruments: Green mortgages, sustainability-linked loans and preferential financing terms tied to ESG performance are becoming more common.
In short: ESG moves from being a “nice-to-have” to a meaningful factor in mortgage underwriting, portfolio risk management and reporting.
2. Key changes in 2025 that mortgage lenders need to watch
Here are the main shifts in 2025, with relevance to mortgage lending and reporting.
2.1 From voluntary to more mandatory disclosures
Reporting frameworks are tightening. For instance, companies in Europe are now subject to the Corporate Sustainability Reporting Directive (CSRD), which expands non-financial disclosure requirements.
While this is corporate-reporting focused, the spill-over effect on financial institutions (including mortgage lenders) is real: investors and regulators will expect more transparency in how mortgage portfolios embed ESG risks.
For example: more granular disclosure of how many mortgages are secured on properties with poor energy performance, or in climate-vulnerable zones.
2.2 Integration of physical- and transition-risk assessments
Lenders are no longer simply underwriting credit risk and interest-rate risk. They are increasingly asking:
Is the property vulnerable to climate risks (flooding, extreme weather, heat stress)?
Does the property meet future energy standards or will it require significant retrofit cost?
Does the borrower or property meet increasingly strict environmental performance standards (e.g., energy efficiency certification)?
As noted by property-finance specialists: “Properties with strong energy credentials … may attract preferential interest rates … Conversely, poorly rated properties can face stricter terms or refusal.”
In mortgage-portfolios this means: lenders will want data on location-specific climate risk, building performance (EPC ratings, retrofit status), carbon intensity, and social aspects such as affordability or community impact.
2.3 Broader definition of “S” and “G” in ESG
Historically, many lenders have focused on the “E” (environment). In 2025, the “S” (social) and “G” (governance) components are gaining prominence:
Social: For example, how housing supports affordability, community resilience, tenant wellbeing, accessibility. As one property-industry commentary predicted: “Much of the ongoing narrative around ESG understandably focuses on the environmental aspects. However … 2025 may be the year that attentions actively turn towards the Social agenda.”
Governance: Transparent ownership structures, responsible borrower behaviour, clear mortgage underwriting policies tied to ESG criteria become part of the reporting puzzle.
2.4 Technology and data become key enablers
To collect, analyse and report meaningful ESG metrics, lenders will rely more on data platforms, automation, AI and modelling. According to ESG-trend commentary: “Tools and platforms … are now integrating … AI … to monitor and analyse ESG data, reducing error and improving credibility.”
In the mortgage context this means: building data-systems to link property characteristics (age, energy rating, flood risk), borrower attributes, geographic climate risks, and portfolio exposures — then rolling this into ESG-reporting frameworks.
2.5 Green/ESG-linked mortgage products expand
Lenders are launching mortgages or refinancings tied to ESG criteria: e.g., discounted rates for green homes, loans contingent on retrofit, or linking interest rates to outcomes. This trend helps align mortgage lending with broader sustainable-finance goals. As one article noted: “The popularity of green bonds and ESG-linked loans is also set to rise, providing borrowers with opportunities to align their financial strategies with environmental goals.”
For mortgage businesses this marks both an opportunity (new product lines) and a risk (loans not properly aligned may suffer reputational/regulatory consequences).
3. What this means for mortgage-originators, investors and borrowers
For lenders & originators
Underwriting criteria will evolve: incorporate energy performance, climate vulnerability, ESG credentials of the property and borrower.
Portfolio-risk management: need to assess concentration risk in high-carbon buildings, climate-exposed geographies, or properties needing heavy retrofit.
Reporting & disclosure: lenders will need to gather new data, standardise metrics, and possibly publish ESG disclosures tied to their mortgage portfolios.
Product innovation: develop green mortgage products, refinancing tied to sustainability, or sustainability-linked terms.
Governance and internal controls: ensure that ESG-linked lending is transparent, avoids “green-washing”, and meets emerging regulatory expectations.
For investors / securitisers
When mortgage loans are packaged (e.g., as mortgage-backed securities), investors will increasingly ask for ESG-linked disclosures: e.g., what proportion of the underlying collateral is in properties with high energy efficiency, or in flood-prone regions.
Rating agencies and institutional investors may demand standardized ESG data and risk metrics for mortgage portfolios.
For borrowers / home-buyers
Properties with strong ESG attributes (energy efficient, climate-resilient, well-governed) may attract better mortgage terms or have higher resale value.
Conversely, borrowers may encounter stricter underwriting if the property is in a climate-vulnerable zone or has poor energy credentials.
Borrowers may increasingly be required to provide ESG-related information (for example retrofit plans, energy ratings, flood risk assessments) when seeking finance.
4. Practical preparation steps for 2025
Here are recommended actions for mortgage lenders (and by extension borrowers) to stay ahead:
Conduct a materiality assessment: Determine which ESG factors matter most for your mortgage portfolio (e.g., building energy performance, flood risk, social housing exposure, governance of originations).
Build data collection and reporting infrastructure: Start capturing property-level metrics: energy ratings (EPC or equivalent), building age, retrofit status, flood/heat risk, geographic climate-vulnerability, borrower ESG profile.
Integrate ESG into underwriting: Modify underwriting frameworks to include ESG criteria (or at least to highlight properties/borrowers with ESG risks). For example: require retrofit plans for properties with low energy ratings.
Define green/ESG-linked mortgage products: Consider designing and launching products that reward borrowers for strong ESG credentials or tie interest rates to sustainability outcomes.
Develop transparency & disclosure frameworks: Plan for how you will report ESG metrics: percentage of portfolio exposed to high‐climate risk, average energy rating of collateral, retrofit commitments, social-impact metrics, governance practices.
Train staff and governance committees: Underwriting, risk, compliance and credit teams need to understand ESG risks and how they affect mortgage portfolios.
Engage with borrowers: Educate borrowers about the importance of energy performance, retrofit needs and climate vulnerability of properties.
Monitor regulatory developments: Many jurisdictions are evolving ESG reporting standards and mortgage-lending rules. Stay up to date.
5. Key challenges and what to watch
While the shift is underway, there are several challenges:
Data availability and quality: Many properties (especially older ones) may lack reliable energy-performance data, climate-vulnerability assessments, or retrofit history.
Standardisation and comparability: Currently different frameworks use different metrics, making it hard to compare across portfolios.
Cost implications: Additional data collection, underwriting changes, and retrofit requirements may increase cost for lenders/borrowers.
Regulatory ambiguity: While frameworks are evolving, many mortgage lenders may find regulatory expectations still unclear or in flux.
Green-washing risk: Lenders and borrowers must be careful that ESG-linked claims (e.g., “green mortgage”) are backed by genuine credentials.
Market uptake: Especially in markets where retrofit cost is high, borrowers may be reluctant or unable to invest in energy-improvements, which may slow uptake of “green mortgage” products.
6. Outlook: What the next few years may bring
Looking ahead, mortgage lending and ESG reporting are likely to converge more deeply:
More mandatory disclosure requirements for mortgage lenders and the underlying collateral portfolios (especially in jurisdictions aligning with CSRD, IFRS S1/S2, etc.).
Greater use of climate-scenario modelling: lenders will assess how portfolios perform under different climate futures (e.g., 2 °C, 4 °C warming) and report exposure.
Standardised property-ESG rating frameworks: akin to credit ratings but for property portfolios, capturing energy performance, climate risk, social impact.
Expansion of sustainability-linked mortgage products, where borrowers commit to retrofit, energy upgrades or community/social impact and receive favourable terms.
Integration of technology tools (AI, big data, remote sensing) to automate ESG data collection and analysis.
A shift from asking “what is your target?” to “what progress have you made?”. As one commentary put it: lenders will want to see actual decarbonisation progress, not just a goal.
Conclusion
For mortgage lenders — and borrowers — 2025 is shaping up as a pivotal year. ESG considerations are no longer peripheral; they are becoming embedded in underwriting, risk management, product design and disclosure. While the journey will not be without its challenges — data gaps, cost pressures, evolving regulation — lenders that act early to integrate ESG into their mortgage portfolios will be better placed to manage risk, satisfy investor/regulator expectations, and access new opportunities (such as green-mortgage products).
From your vantage writing about e-mortgages, you may want to explore how these ESG shifts intersect with digital mortgage origination, borrower education and retrofit financing — a fertile space for innovation.
