The end of 2020 saw a myriad of commitments from companies, governments, and investors, to transition to net zero carbon. Now it’s time to make those commitments a reality. For the investor community, that means identifying and financing projects that mitigate the impact of climate change and emit zero, or nearly zero, greenhouse gas emissions.
Sustainable investments can cover a wide array of projects, from renewable energy to innovative construction materials. One potential segment is the built environment, which contributes approximately 20 percent to global greenhouse gas emissions. But here’s the thing: buildings can be quite complicated.
That’s where EDGE comes in.
If you’re not familiar with EDGE, EDGE is a green building standard and certification that was developed by IFC, member of the World Bank Group. Part of its unique value proposition is the EDGE App, which is a free software tool that allows anyone around the world to compare a building against a local baseline and identify the most cost-effective ways to green it.
EDGE is the perfect tool for investors looking to finance green buildings.
Why? Because EDGE is quantifiable, global, comparable and reputable.
Anyone in the green building market knows it can get complicated quickly. The terminology, the nuance around shifting burdens, the technical requirements, the list goes on. When you add green building certifications into the equation, it gets even more complicated. Some information is qualitative, some information is quantitative, some standards require points, others look at reports… You get the picture.
This complicated market landscape has typically been a hinderance for investors looking at green buildings. EDGE is changing that narrative.
The EDGE App gives investors the data required to make an informed decision on financing: the percentage improvement of a building compared to a local baseline and the estimated carbon savings.
This quantifiable data is invaluable because it does not require interpretation or subjective assessments. Instead, it gives a clear data point that can be interpreted by experts and non-experts alike. The EDGE App provides the percentage improvement across different resource-efficiency categories and tells the user whether the building meets the minimum 20 percent threshold improvement over a local baseline, which is the EDGE standard.
There is also transparency within the application that allows investors to take a deeper look. All baseline calculation data can be revealed through the application and in cases where an investor needs to use a different baseline, the investor can tweak the assumptions and make a comparison.
For investors working around the world, the green building tapestry is large and complicated. Every country seems to have its own standard, or several standards, and they all look a little bit different.
That typically translates to investors conducting a thorough market assessment to understand what each green building standard evaluates, before building capacity internally across all the relevant standards so that when investment opportunities arise, the financing team can apply the standard. That is a complicated, expensive and time-consuming process that can hinder entrance into the green real estate market.
This is again where EDGE can make a difference. EDGE wasn’t designed with one country in mind. Rather, it was designed to be applied globally.
That is incredibly powerful for a couple of reasons.
First of all, it means that that EDGE takes local differences and nuances into account. This is important because it acknowledges the differences in markets around the world, instead of taking a mould from one country and attempting to make it work across the globe. Second of all, it means investors only need to understand and work with one standard. This can reduce workload for investors and streamline internal processes, saving resources and allowing for the focus to be on the actual investment as opposed to how to correctly identify a green building.
As a global standard, EDGE also allows investors can compare investments across different countries. Investors oftentimes engage with consultants in different regions to calculate baselines. The problem is that when the methodology isn’t standardised, a consultant may calculate the baselines using different methodologies and databases, leading to difficulties in comparisons.
IFC uses a standard methodology to calculate the baseline for the EDGE App, which means that investors can use the baselines within EDGE to accurately compare investments across different regions. This becomes very interesting for investors working across a diverse portfolio of countries because suddenly a building in Ecuador can be compared with a building in Mongolia, while also taking into account the local differences.
EDGE was created by IFC and backed by the World Bank. It is the only green building standard that was developed by investors, which means it was designed with investor requirements in mind. This provides assurance to investors as projects undergoing EDGE certification are guaranteed to meet high levels of rigor.
In addition to the backing from the investment community, EDGE provides assurance to investors because it is data-driven. The EDGE App produces a large quantity of valuable data, from the percentage efficiency improvements to the incremental cost and return on investment to the carbon savings. This information can be used throughout the financing process, from the due diligence all the way through to impact reporting, to ensure that money is being channeled into projects that are truly shifting the needle on climate change.
Intrigued to learn more? We have an introduction to EDGE webinar coming up later this month. Join us and get a closer look at how EDGE works.