We are finally seeing the world come to terms with the climate crisis, and the idea that to protect life on this planet we must meet net zero emissions by 2050. With COP26 now around the corner, leaders from the business and government world are very focused on setting ambitious climate commitments and targets to help make this happen, as well as bringing in financial institutions to discuss how we actually finance these projects.
From the developer and project owner side, there is clearly appetite for building green, but there continues to be a concern in the market of how to implement it, and more important, how to finance these improvements and developments.
The good news? Investors are interested in financing green buildings. It is a compelling asset class and a growing investment opportunity across the globe.
Today’s buildings generate 28 percent of energy-related greenhouse gas emissions and consume 40 percent of electricity globally, contributing significantly to the climate challenge ahead of us. This creates a significant opportunity for green investments. IFC has calculated that there is a $24.7 trillion investment opportunity in emerging markets alone by 2030 in green buildings.
Over the next few weeks, we will be sharing insights directly from different financial institutions on the challenges with sustainable construction and the opportunities for projects to get financed.
Before understanding what criteria projects need to meet to get financed, we first need to understand why things have been difficult to date. One of the biggest barriers in financing green real estate isn’t the actual financing, but the lack of education around green buildings across the value chain.
Developers, investors, tenants, and the broader public, still do not understand green buildings and how to make them happen. This presents a unique challenge as it creates uncertainty across all parties on what qualifies as green and how to implement it, particularly at scale.
It starts with the developers and owners of buildings. There is still confusion and lack of clarity on the business case for building green. Many around the world still think there is a very high incremental cost and are unclear on the tangible business benefits. There is also a lack of capacity in implementing green building technology. Many developers do not have the experience or access to the skills required to build or retrofit green buildings. For those that do, they often don’t have the knowledge or understanding of the green finance market, and don’t know what financial options are available and how to access better financial terms with green buildings.
Many of these challenges are reflected in the investor community too. Many investors are lacking the information and knowledge that green building investments lead to lower default rates and don’t fully understand the business case for green building portfolios themselves. For those that do, there is another challenge in how to identify what classifies a green building and match potential projects to the financial terms and requirements as defined by the financial institution.
Even from the side of the end user, whether that is the tenant or the general public, awareness of the benefits of green buildings remains very low. When the end user isn’t aware of green buildings. Green buildings bring utility savings, making a very compelling case for the end user, but if users don’t know this, they can’t demand it from their landlords. And when there is low demand, there is lower incentive for developers and owners to invest in this area.
All of these factors create a vicious circle, as shown in the infographic below.
So how do we solve these challenges? Stay tuned for our series on finance for green buildings to find out!
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
|cookielawinfo-checbox-analytics||11 months||This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".|
|cookielawinfo-checbox-functional||11 months||The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".|
|cookielawinfo-checbox-others||11 months||This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.|
|cookielawinfo-checkbox-advertisement||1 year||The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Advertisement".|
|cookielawinfo-checkbox-necessary||11 months||This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".|
|cookielawinfo-checkbox-performance||11 months||This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".|
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
|_ga||2 years||This cookie is installed by Google Analytics. The cookie is used to calculate visitor, session, campaign data and keep track of site usage for the site's analytics report. The cookies store information anonymously and assign a randomly generated number to identify unique visitors.|
|_gid||1 day||This cookie is installed by Google Analytics. The cookie is used to store information of how visitors use a website and helps in creating an analytics report of how the website is doing. The data collected including the number visitors, the source where they have come from, and the pages visted in an anonymous form.|
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
|_gat_gtag_UA_176578450_1||1 minute||No description|