Financing for Green Buildings Prashant Kapoor July 2013

Transcription

1 Financing for Green Buildings Prashant Kapoor July

2 This presentation is structured into five main parts Why Green Housing Why are greener buildings important? Mapping Macro drivers: Where is the biggest demand? Opportunities & Barriers What are the sector level opportunities Why aren t Green Buildings very prevalent? Green Mortgages What is a green mortgage? The opportunity for mortgage lenders IFC EDGE standard IFC s green buildings certification system EDGE How can it make a difference? IFC Experience Examples of Green Buildings projects How can IFC help? 2

3 IFC is the largest development bank focused solely on the private sector Main driver of private sector development in the World Bank Group Profitable since 1956 More than half of IFC s 3,763 staff work in field offices More than 100 offices in 95 countries 3 main businesses Investment Services Advisory Services IFC Asset Management Co. $56.5 Bn portfolio $200 m per year $4.5 Bn under mgmt 3

4 IFC s Global Green Building Track Record Mexico : 1.Optima Energia ESCO - Energy / water efficiency in hotel sector US$10 M Loan 2.Artha Capital First example of a Green Building Property Fund. US$25 M Equity 3. Hospitaria First example of a Green Hospital US$9.5 M Equity Romania: Lidl Stores High insulation, heat recovery ventilation, and low-energy lighting US$67.5 M Loan Gambia: Coco Ocean Hotel energy efficiency 6M Loan (*US$0.2 M) Colombia: City Express EDGE certified Hotels US$37.1 M Loan Turkey: OZU First Green University US$35 M Loan Kenya : Housing Finance Bank Green Mortgages US$20 M Loan Rwanda: MSC Kigali Green Building Shopping Center US$10 M Loan & US$3 M Equity Jordan: Zara Energy efficiency and solar panels CPLP: US$1.8 M Loan Maldives: 1.Shangri-la Hotel Energy efficiency CPLP: US$1.5 M Loan 2. Universal Hotel Energy efficiency CPLP: US$2.5 M Loan India: 1. VBHC Affordable Housing EDGE Certified homes US$12 million 1. Fortis Hospitals LEED Certified hospitals US$100 million Note (*) financing for climate friendly project; was part of a larger total IFC investment 4

5 IFC s green building regulations case study: Jakarta Problem: One of the world s largest greenhouse gas emitters Building sector 25% of energy use in 2004 rise to 40% in 20 years IFC help with green buildings code: Energy and water efficiency requirements for large commercial and high-rise residential buildings Require climate change adaption practices Simple to implement, effective and easy to monitor Enacted in April, 2012 Effective as of January 2013 with effective implementation of the green buildings code in Jakarta, the city can serve as a model for implementation in other cities in Indonesia. Fauzi Bowo, Governor Jakarta Province IFC is now also working in Vietnam, China, Philippines, Colombia 5

6 What is the cost impact? Payback assessment for offices Cost Payback Green Building Measure %Saving increase period Action Window to wall ratio 8.0% Negative 0 Include Solar Shading Devices 17.3% 7.2% 25.0 Consider Reflectivity - Wall 0.5% 0.0% 4.8 Include Thermal Conductance (Wall U-Value) 0.3% 0.5% 98.6 Exclude Reflectivity Roof 0.2% Negligible - Include Thermal Conductance (Roof U-value) 0.1% 0.0% 18.1 Consider Glazing Assembly Properties (U-value, SHGC, VLT) 7.3% 0.1% 0.9 Include COP of air conditioning equipment 11.4% 1% 5.4 Include Variable Speed Drives for cooling towers 9% 0% 0 Include Heat recovery on extract air 2% Cost awaiting 26.2 Consider Solar collectors for Hot water NA NA --- Exclude Photo electric control perimeter lighting 18% 2% 7.4 Include Exterior lighting controls NA NA --- Exclude Low energy lighting [CFL, T5, LEDs etc] 7% 0.12% 1.0 Include Electronic Ballast 2% Negligible 0.0 Include Sub-metering benefits 3% NA NA Consider Water efficient fittings 40% 0.35% 6.0 Include Rainwater harvesting 15% Cost awaiting 26.2 Consider Recycling onsite Sewage T plant 67% Cost awaiting 7.4 Consider Water metering NA Negligible NA Include Storm water attenuation and ground water recharge NA Minimal impact NA Include With an overall cost increase of 3% energy saving of more than 20% can be achieved across all new buildings in Jakarta

7 Example of IFC s Green Building Client: Vinte, Mexico Green Homes Business: Housing developer with affordable and sustainable home design as an integral part of its business model. VINTE s attractive, well-planned developments are a major step up and affordable through Mexico s Green Mortgage program that provides incentives for purchasing energy-efficient homes. The program recently won the International Star of Energy Efficiency Award from the Alliance to Save Energy, a business-led global NGO. IFC s first direct investment in a sustainable housing developer Key features Homes typically have solar hot-water, water efficient fittings, low energy light blubs and smart meters. IFC s first direct investment in a sustainable housing developer Photo courtesy of Fernando N. Escárcega,Real del Sol-VINTE Project.

8 Example of IFC s Green Building Investment: Actis Africa RE Fund 2 One Airport Square, Accra, Ghana Actis has adopted IFC s mandatory Green Building standards* for all sites and has put in place sustainability guidelines applicable to all of the Fund s property investments. IFC will continue to provide valuable green building advice and supports Actis benefited from positioning itself as a Green Fund and therefore help it to attract sustainability-minded investors and diversify its investor base. Key Features Building over 50% more energy efficient than peer group in Accra Natural light and natural ventilation to minimise energy demand Rainwater harvesting Overhangs provide shading from intensive solar radiation Heat recovery through centralised fresh air system Ear-marked to be first Green Star rated building in West Africa * Note: IFC's suggested minimum performance for 'Green Buildings' is based on CO2/energy criterion defined as a green field building that has 25% less energy consumption and/or 25% less CO2 emissions compared to an equivalent benchmark

9 Example of IFC s Green Hotel Client: City Express, Mexico Business: As of August 2011, City Express operates 59 hotels with 6,519 rooms. The Company operates three well known hotel brands in Mexico: (i) City Express (ii) City Suites ; and (iii) City Junior. Green Hotel IFC s EDGE rating system have been piloted on 5 hotels across Mexico and Costa Rica. These hotels on average have: 24% energy reduction 36% water reduction 37% reduction of embodied energy in materials One of IFC s first Green Hotel investments Key features Hotels typically have lower window to wall ratio, double glazing, roof /wall insulation, efficient cooling and heating systems, water efficient fittings, low energy lighting and concrete filler slab construction.

10 Example of IFC s Green Mortgage : Housing Finance Bank, Kenya Green Housing Finance Business: Housing Finance Bank Kenya is one of the largest provides mortgages and Construction finance provider in Kenya. The funds will be used to help the mortgage lender increase access to housing finance, while pioneering the market for environmentally friendly green housing. The project will apply IFC s green building standards to test the viability of this market on a commercial scale. Key features IFC Financing: US$16 million equity + $4m CCCP loan Significance: IFC s first investment in a financial institution for green construction Photo courtesy of Fernando N. Escárcega,Real del Sol-VINTE Project.

11 Example of IFC s Housing Retrofits : Bosnia, Serbia, and Kosovo Project: partnership with major banks in Bosnia, Serbia, and Kosovo. Project focused on (i) renovation of the existing housing stock with Energy Efficiency improvements; and (ii) use of cleaner and renewable sources of energy (such as natural gas, solar energy) Technical Assistance was also given for product development, product launch and marketing, training of staff, and to address regulatory and legal barriers Key Features IFC Financing: Loan package of up to 35 million to develop housing finance and EE loan portfolios Significance: IFC s first investment in a financial institution for green construction Photo: by Ed Stocker,

12 Why are greener buildings important? Low income families in Colombia pay close to 20% of their household income for energy and water Globally, 400 million homes are predicted to be built by 2020 most of them will be in emerging markets The building already emits 15% of all GHGs and consumes 40% of all electricity Designing new buildings for greater efficiency is the single biggest, cost effective way to reduce GHGs

13 Residential buildings What are green techniques? Energy efficient ceiling fans and lighting Passive design features for thermal comfort Thermal insulation Dual-flush toilets; water-efficient fixtures Energy efficient appliances Modernization of cooling or heating systems Rainwater harvesting systems Solar water heaters Solar electricity using photovoltiaics TYPICAL HIGH IMPACT INTERVENTIONS Roof and wall insulation Low environmental impact building materials [embodied energy] Water efficient fittings and rain water collection Smart meters for better control and metering Solar hot water heaters 13

14 Commercial building Solar shading and minimise glazing Smaller office plan depth for daylight and ventilation. Thermal insulation Mixed Mode cooling/heating systems Modernization of cooling or heating systems Water efficient fittings Solar electricity using photovoltiaics HIGH IMPACT INTERVENTIONS What are green techniques? Passive cooling and ventilation design Daylighting, lighting control and low energy lighting Low environmental impact building materials for slabs/walls High efficiency water cooled chillers 14

15 Why aren t green housing developments more prevalent? Technologies and know-how are available. Economic benefits are well documented. But barriers remain: Marginally higher upfront costs High perceived market risk Weak enabling environment Asymmetry of information 15

16 Why aren t green housing developments more prevalent? Home Owners Technologies and know-how are available. Economic benefits are well documented. But barriers remain: Marginally higher upfront costs High perceived market risk Weak enabling environment Asymmetry of information Investors We would fund energy efficient buildings, but there is not demand for them We would like to have an energy efficient home, but there aren t any Cycle of blame Developers We would ask for energy efficient homes, but investors won t pay for them Builders We can build energy efficient homes but developers don t ask for them 16

17 Residential Sector: Key drivers and barriers KEY DRIVERS Home owners Cost saving from lower energy and water bills Better thermal comfort and self-sufficiency Home owners pride in doing their bit for the environment Long term value retention SPECIFIC ISSUES Home builders/developers Better corporate image and Green branding Higher demand creating quicker sale and therefore better use of capital Corporate responsibility towards the environment Long term value retention of properties Financial sector does not understand the green building assert class. Difficulty for home buyers and banks to assess efficiency of properties. Developers find it difficult to capitalize investments in green measures. Long term management and transfer of responsibility of common services. 17

18 Market in green homes can take off quickly 600,000 green homes each year in Mexico 2.4 million people IFC construction finance Home buying credit of up to US$1,250 for ecotechnologies Savings on utility bills offsets monthly mortgage INFONAVIT declared all mortgages green 18

19 and we have seen assets ratings provide tangible value Increase in property values more than cost of improvements In Netherlands, homes with high energy efficiency sell at a premium of 3.7% Energy efficient homes in US have 33% less delinquency rates on housing mortgages 19

20 Financial sector needs a commoditised certification system Green Mortgage Example When Devika Sharma bought a home, her lender made it possible to add solar hot-water system by adding $500 to their loan bumping it from $32,000 to $32,500. That raised their monthly mortgage by $4, but their utility bills dropped by $10 monthly. Energy saving $10/month Additional EMI $4/month Net saving during $6/month the loan period 20

21 More effective strategy to commodities green buildings is required High end systems focused on top-tier clients have provided leadership Informal Building Sector EDGE will democratize the green buildings market Limited capacity to implement regulations Need for voluntary quasi-regulations system Need for simple, quick, and affordable system The EDGE program has the potential to transform the green buildings market with cost effective solutions

22 What is Excellence in Design for Greater Efficiency? a tool to improve design and rate building performance, a standard, and a rating system EDGE stands for Excellence in Design for Greater Efficiencies. EDGE is a green building system designed for emerging markets. EDGE reveals technical solutions for going green and captures capital costs and projected operational savings. EDGE is a simple, inexpensive, and reliable way to save on utility bills while reducing a project s carbon footprint. ENERGY 20% WATER 20% MATERIALS % An Assessment tool + Rating system A Universal Standard A Certification System 22

23 EDGE can be useful for all 23

24 The EDGE Tools: Data entry section

25 The EDGE Tools: Energy efficiency section

26 The EDGE Tools: Water efficiency section

27 EDGE Green Building Market Transformation Program A four-pronged approach to incentivize market adoption of green building practices Builds on resources and pipeline of IFC investments and advisory Supporting New FI Products Government regulations and procurement IC PP P Investing in buildings and materials Incorporates a global certification system to define and validate green buildings. FM A2 F standard, tool Edge certification system CBG MAS SBA

28 IFC s Global Reach 100+ country and regional advisory services offices worldwide Moscow Almaty Washington Istanbul New Delhi Cairo Mexico City Hong Kong Dakar Port-of-Spain Bogota Nairobi São Paulo Johannesburg Buenos Aires IFC HQ/Hub Offices IFC Operational Centers IFC Country Offices 28