To encourage investors to put their money into sustainable buildings, the International Finance Corporation (IFC) has released a report entitled Green Buildings: A Finance and Policy Blueprint for Emerging Markets. It says that by 2030, in emerging markets alone, green buildings will offer a $24.7 trillion investment opportunity, which will spur economic growth and accelerate sustainable development.
The report gives proof that green buildings are financially efficient, as well as saving water and energy. It highlights the clear financial benefits investors, banks, developers and owners, including governments, can expect when entering the green building market. Green buildings command substantially higher sale premiums – up to 31% more, and sell more quickly than traditional buildings. Furthermore, green buildings maintain higher occupancy rates – up to 23% higher – than conventional buildings and offer higher rental income. By consuming less water and electricity, operational costs are up to 37% lower than traditional buildings. When green features are incorporated early in the building design, the cost of green construction can range from savings of 0.5% to 12% in additional costs.
The report also notes that green buildings can be a strong driver of economic growth, generating upwards of nine million skilled jobs in both the renewables and construction sectors by 2030. Currently, green buildings account for just 8% of the construction and renovation sector, indicating a vast potential for growth.
In Sub-Saharan Africa, cities are expected to double in population by 2050, providing a $768 billion investment opportunity to green future construction until 2030. Of this $768 billion, $509,6 billion is in the residential sector, with $258,4 billion in the commercial sector.
The report draws on IFC’s almost decade-long experience investing $5.5 billion in green buildings, as well as lessons learned helping governments to design and implement building codes to catalyse green building markets. IFC has also designed its own certification system designed for emerging markets, EDGE (Excellence in Design for Greater Efficiencies), which is available in more than 150 emerging markets.
South Africa is one of these markets and speaking at the GBCSA Convention in October 2019, Marcene Mitchell, IFC senior manager of strategy and business development in the climate business department, noted that South Africa is making progress with the implementation of EDGE.
Locally, 10 000 housing units have been EDGE rated in South Africa. Mitchell mentioned an IHS development at Waterfall Park, which will see 4 900 units rated. Fourleaf – the first project rated in South Africa and financed by Old Mutual, showed just 0.5% incremental cost to green the development. She also mentioned developer Balwin, which has registered 16 000 housing units for certification – the largest registration to date.
“By doing good we can also do well,” emphasised Mitchell at the convention. She added that ambition must be increased to change the environment and things must be done differently to achieve different results. “We must move faster. We need bold action if we are to meet net zero carbon by 2050,” she said, highlighting that it is investment that spurs market transformation.
As such, the IFC’s Excellence in Design for Greater Efficiencies (EDGE) certification has increased its ambitions and launched the EDGE advanced and EDGE Net Zero ratings.
There is a global imperative for financial flows to be reoriented toward sustainable development.
The IFC’s report highlights best practices by and for investors, banks, governments, developers, and owners, and provides an investment blueprint for scaling up green buildings across emerging markets. Shifting lending and investments towards green buildings will allow investors to take advantage of this significant investment opportunity. It will also help build stronger real estate investment portfolios resilient to financial, regulatory, and reputational risks associated with the transition to low-carbon economies.
Governments stand to benefit financially from the transition to green construction, and the shift will also help them meet their social and environmental objectives. Globally, 28% of greenhouse gas emissions come from energy use in buildings, making them an important part of helping governments to achieve their climate change targets.
Access the Green Buildings: A Finance and Policy Blueprint for Emerging Markets report here. It’s a great report to have in your ‘business case of green’ arsenal and includes a handy 5-point How To Build a Green Real Estate Portfolio on page 32.