The reduction in energy demand for heating and cooling with insulation materials increases the material related environmental impact. Thus, implementing low embodied energy materials may equilibrate this trade-off. Actual trends in passive house postulate bio-based materials as an alternative to conventional ones. Despite that, the implementation of those insulators should be carried out with a deeper analysis due to their hygroscopic properties. The moisture transfer, the associated condensation risk and the energy consumption for seven bio-based materials and polyurethane for a building-like cubicle are analysed. The performance is evaluated combining a software application to model the cubicle (EnergyPlus) and a tool to optimize its performance (jEPlus). The novelty of this optimization approach is to include and evaluate the effects of moisture in these insulation materials, taking into account the mass transfer through the different layers and the evaporation of the different materials. This methodology helps optimise the insulation type and thickness verifying the condensation risk, preventing the deterioration of the materials. The total cost of the different solutions is quantified, and the environmental impact is determined using the life cycle assessment methodology. The effect of climate conditions and the envelope configuration, as well as the risk of condensation, are quantified. The results show that cost and environmental impact can be reduced if bio-based materials are used instead of conventional ones, especially in semiarid climates. Condensation risk occurs for large thicknesses and in humid climates. In our case studies, hemp offered the most balanced solution.