The social impact of energy efficiency is becoming increasingly significant in Europe. Once seen mainly as a way to save money, energy efficiency now brings wider benefits across communities. According to the International Energy Agency (IEA) and leading European think tanks, well-designed energy efficiency policies can change lives, making homes healthier, communities stronger, and opportunities more accessible for people across different backgrounds.
Recent increases in energy costs have revealed strong inequalities, with millions living in homes that are too cold in winter and overheated in summer, often at substantial cost to their health and finances. Countries that have focused on improving the efficiency of buildings and infrastructure have seen benefits extending beyond energy savings.
As policymakers and investors search for solutions with wider social impact, understanding and recognizing these additional social, economic, and health benefits has become essential.
The Multiple Benefits Framework
The International Energy Agency’s Multiple Benefits Framework broadens the way we understand the importance of energy efficiency. Traditionally, efficiency was evaluated by reductions in energy use, lowered emissions, and cost savings, metrics that remain at the core of most national strategies. But the IEA’s analysis now shows that the impact of energy efficiency runs deeper and delivers an array of benefits, such as improved air quality and increased economic resilience.
Figure 1 – Multiple Benefits of Energy Efficiency (Source: IEA)
Breaking Down the Multiple Benefits of Energy Efficiency
Social Impact of Energy Efficiency on Health and Wellbeing
Energy efficiency upgrades, especially in buildings deliver measurable health improvements across Europe. Poorly insulated homes are linked to respiratory and cardiovascular illnesses, mental health stress, increased winter mortality and higher healthcare costs. Studies attribute between 30% and 50% of excess winter deaths to poor housing conditions, highlighting the significant health risks associated with cold and inefficient homes.
Figure 2 – Health Benefits of an Energy Efficient Home
Coal fired power plants are a major contributor to air pollution, releasing harmful substances into the atmosphere. According to a report from the Health and Environmental Alliance (HEAL), emissions from coal power plants in Europe amount to more than 18,200 premature deaths, about 8,500 cases of chronic bronchitis, and over 4 million lost working days. The economic costs amount to €42.8 billion per year, with the largest coal powered plants located in Poland, Romania and Germany.
Figure 3 – Average Annual Health Impacts Caused by Coal Powered Plants in the EU (Source: HEAL)
Social Impact of Energy Efficiency on Employment and Skills
Targeted energy efficiency investments generate significant employment, often more than any other energy-related intervention. Reduced unemployment provides a variety of social benefits, in addition to monetary ones, such as improved household incomes and reduced budgetary outlays for unemployment payments. Estimates have ranged as high as 27 jobs years created for every EUR 1 million spent on energy efficiency measures in the residential sector. Jobs in energy efficiency tend to be local, stable, and difficult to offshore, ensuring benefits remain within communities.
Figure 4 – Workforce Employed in the Renovation of Residential Buildings (Source: Navigant, Ipsos Belgium 2019)
Reducing Energy Poverty Through Energy Efficiency
Reducing energy poverty is one of energy efficiency’s most direct social benefits. In 2024, 30% of the populations of Portugal, Bulgaria, Greece and Lithuania could not adequately heat their homes. Energy poverty ranged from 10% in the Netherlands and Hungary to over 20% in Sweden, Malta and Latvia. Studies from Ireland, the UK, and broader EU retrofit schemes report that energy efficiency upgrades in social housing consistently result in substantial energy bill reduction and improve comfort and housing quality for tenants.
Figure 5 – Percentage of Households Behind on Utility Bill Payments in Europe in 2022 (Source: Eurofound)
Energy Security
Energy efficiency plays a crucial role in boosting Europe’s energy security by reducing overall energy demand, decreasing reliance on volatile fossil fuel imports, and protecting consumers and economies from sudden energy price shocks. Comprehensive energy efficiency policies contribute to reducing the need for costly infrastructure investments by lowering overall energy demand and peak loads, thereby supporting a stable and resilient energy system.
According to the Buildings Performance Institute Europe, improvements in building energy systems help reduce energy losses, decrease grid capacity requirements, and facilitate the cost-effective integration of renewable energy sources into the electricity grid.
Case Study: PAUL Tech and Solas Capital
Tenants in German residential buildings frequently live with inefficiency heating systems that increase energy costs and contribute to the country’s carbon footprint. With PAUL Tech’s Internet-of-Things technology, a solution is offered using advanced sensors and automated controls that can reduce energy consumption by as much as 40%. The Solas Sustainable Energy Fund, advised by Solas Capital, addressed this barrier by €30 million in funding to PAUL Tech, enabling the company to deliver its heating optimisation systems with no initial financial burden on building owners.
The financing model extends the benefits of energy efficiency beyond technical improvements. Through these upgrades, thousands of apartments have benefited from warmer and more comfortable environments, with tenants seeing meaningful reductions in energy bills.
The Institutional Investment Opportunity
For institutional investors seeking stable, long-term returns with meaningful climate impact, energy efficiency project debt represents a compelling opportunity. These investments offer several distinct advantages compared to traditional green investments:
- fixed and long-term cash flows through contractual off-take agreements that eliminate electricity price risk;
- extremely diversified counterparty exposure across hundreds of projects and multiple EU countries;
- limited correlation to traditional asset classes; and
- energy efficiency assets are typically essential for building operations, meaning payments continue even during economic downturns.
By investing in highly distributed portfolios of energy efficiency projects investors add significant diversification to their existing private markets strategy while achieving their climate investing targets.
More Than Just Reduced Emissions
Energy efficiency in the EU delivers much more than just reduced energy use and emissions. It significantly improves public health, economic stability, and social wellbeing. Upgrading buildings lowers healthcare costs by addressing poor housing condition, reduces energy bills to protect households from price volatility, and supports job creation in local communities.
To unlock the full potential of energy efficiency, policies and investments must recognise these wide-ranging benefits, not only the technical savings but also social, economic and the environmental gains.