Positive Energy Neighbourhoods (PENs) bring together deep renovations, infrastructure upgrades, and greener public spaces to create climate-neutral communities. They deliver co-benefits – from healthier homes and greater comfort to stronger social inclusion and climate resilience. 

This paper examines the need to reduce reliance on public funding and actively leverage private finance, ensuring broader and more sustainable investment in the transition to climate-neutral neighbourhoods. It examines barriers and financing solutions that account for the broader co-benefits of PEN renovations. It discusses how public funds can be deployed most effectively to de-risk and catalyse private investment, how funding models can be designed to include vulnerable households, and how Environmental, Social and Governance (ESG) finance can be leveraged. 

Key insights: 

• Considering the environmental and social co-benefits, blended finance should be applied to support the renovation of public and private buildings, infrastructure upgrades and urban regeneration. 

• Special purpose vehicles, whether integrated within renewable energy communities or operating independently, can help isolate risk and aggregate investment. 

• Improved data collection at all stages of the PEN renovation process can also reduce investment risk. 

• Vulnerable households must be included in PEN renovations by providing financing solutions that can cover up to 100% of investment costs, using a mix of grants, subsidies and public loan guarantees. 

• By showcasing practical solutions and policy-relevant recommendations, the report provides a roadmap for policymakers, investors, and local authorities to accelerate the uptake of PENs and deliver on Europe’s decarbonisation objectives.