Green Buildings: a Finance and Policy Blueprint for Emerging Markets
Total Page:16
File Type:pdf, Size:1020Kb
Green Buildings A FINANCE AND POLICY BLUEPRINT FOR EMERGING MARKETS About IFC IFC—a sister organization of the World Bank and member of the World Bank Group—is the largest © International Finance Corporation (2019). All rights reserved. global development institution focused on the 2121 Pennsylvania Avenue, N.W. private sector in emerging markets. We work with Washington, D.C. 20433 more than 2,000 businesses worldwide, using our Internet: www.ifc.org capital, expertise, and influence to create markets The material in this work is copyrighted. Copying and/or transmitting portions or all and opportunities where they are needed most. of this work without permission may be a violation of applicable law. IFC encourages In the 2019 fiscal year,, we delivered more than dissemination of its work and will normally grant permission to reproduce portions of $19 billion in long-term financing for developing the work promptly, and when the reproduction is for educational and non-commercial countries, leveraging the power of the private purposes, without a fee, subject to such attributions and notices as we may reasonably sector to help end extreme poverty and boost require. shared prosperity. IFC does not guarantee the accuracy, reliability, or completeness of the content For more information, visit www.ifc.org. included in this work, or the conclusions or judgments described herein, and accepts no responsibility or liability for any omissions or errors (including, without limitation, typographical errors and technical errors) in the content whatsoever or for reliance thereon. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The contents of this work are intended for general informational purposes only and are not intended to constitute legal, securities, or investment advice, an opinion regarding the appropriateness of any investment, or a solicitation of any type. IFC or its affiliates may have an investment in, provide other advice or services to, or otherwise have a financial interest in some of the companies and parties named herein. All other queries on rights and licenses, including subsidiary rights, should be addressed to IFC Communications, 2121 Pennsylvania Avenue, N.W., Washington, D.C. 20433. The International Finance Corporation is an international organization established by Articles of Agreement among its member countries, and a member of the World Bank Group. All names, logos, and trademarks are the property of IFC and you may not use any of such materials for any purpose without the express written consent of IFC. “International Finance Corporation” and “IFC” are registered trademarks of IFC and are protected under international law. Green Buildings A FINANCE AND POLICY BLUEPRINT FOR EMERGING MARKETS Contents ii Acknowledgements iii Foreword v Executive Summary 1 Introduction 5 29 UNDERSTANDING THE 69 MARKET FOR GREEN Annex BUILDINGS BUILDING THE MARKET 75 FOR GREEN BUILDINGS What is a Green 6 Financing Green 30 CONCLUSION AND Building? RECOMMENDATIONS Buildings Acronyms and Endnotes Current and Potential 10 79 Green Buildings Market Policy and Regulatory 46 Building Blocks The Business Case for 18 Green Buildings Voluntary 58 Commitments to Green Buildings Contents BOXES FIGURES 8 Box 1: EDGE: Powering green building transformation in 12 Figure 1: Investment Opportunity by Property Type and emerging markets Region 14 Box 2: Estimating the investment opportunity in green 13 Figure 2: Investment Opportunity Across Regions buildings 15 Figure 3: Total Opportunity by Building Type 17 Box 3: Winning strategy to appeal to institutional investors 21 Figure 4: Green Hotel Value Example 19 Box 4: The cost of building green in emerging markets 22 Figure 5: Income Capitalization of Green Buildings 24 Box 5: Green mortgages: A triple win 23 Figure 6: Green Mortgage Example 26 Box 6: Integrating resilience to climate impacts into building design 60 Figure 7: Differences Across a Sample of International and National Certification Systems and Their Uptake 34 Box 7: Building a green real estate portfolio: From vision to supporting clients 35 Box 8: Shaping the green construction market in Colombia 36 Box 9: ING: Client education to strengthen client relationships 37 Box 10: Using green construction finance to launch a green mortgage program 38 Box 11: Examples of green bonds issued to finance green buildings in 2018 40 Box 12: How to issue a green bond, loan, or sukuk 41 Box 13: Barclays blueprint for green bonds 44 Box 14: Catalyzing the green buildings market in South Africa 55 Box 15: Clear green bond guidelines as a lever for the green buildings market 62 Box 16: Market response to multiple green buildings rating systems 64 Box 17: Greening offices through leases in Singapore 65 Box 18: Effecting change across the industry through collaboration 66 Box 19: AccorHotels’ sustainability-linked loan facility Acknowledgements IFC's work in green buildings has benefited from Minchew, and Caitriona Palmer, and guidance from Narayana Minnal Sreenivasan, Smita Thomas, Ronald collaboration with development partners, in particular, Corinne Figueredo, Rusmir Music, and Ommid Saberi. Wu, and Nina Zegger. the State Secretariat for Economic Affairs of Switzerland Elizabeth Lewis and Hlazo Mkandawire managed The authors are grateful to several other colleagues (SECO) and the United Kingdom government. Other communications; creative design, layout, and printing for their input and peer review: Chris Botten (Better partners included European Union; the Ministry services were provided by Irina Sarchenko and Gregory Buildings Partnership); Shamir Ghumra (BREEAM); of Finance of Japan; the Hungarian Export-Import Wlosinski. Copy-editing services were provided by Gina Hall (Carbon Trust); Nora Steurer (GABC/UNEP); Bank; the Canada Climate Change Program and the Clarity Editorial. Yulia Guzairova managed the budget, Georgina Smit (Green Building Council South Africa); Department of Foreign Affairs, Trade, and Development, and Darius Maleki (intern) and Lyudmila Podgola Alice Huang and Maxine Jordan (IEA); Vasudevan Canada; the Royal Ministry of Foreign Affairs of provided additional support. Suresh (Indian Green Building Council); Jessica Denmark and the Danish Green Growth Fund; the Long (Nuveen); John Kraus (RICS); Alifia Doriwala Federal Ministry of Finance of Austria; the Ministry Many World Bank Group colleagues and experts (RockCreek Group); Brian Dean (SEforAll); Martina of Foreign Affairs of Finland; the GEF-IFC Earth provided critical input and ideas to shape this report, Otto and Matthew Ulterino (UNEP); Sean McMahon, Fund Platform; and the World Bank’s Energy Sector as well as feedback during review: William Beloe, Sarah Merricks, and Robert Tufts (U.S. Green Building Management Assistance Program (ESMAP). Martina Bosi, Lenore Cairncross, Shamsah Dhala, Council); Luca De Giovanetti, Roland Hunziker, and Gabriel Goldschmidt, Neil Gregory, Ruth Hupart, This report was prepared by the Climate Business Cristiana Jolivet (WBCSD); and James Drinkwater and Prashant Kapoor, Tom Kerr, Patrick Leahy, Shirong Department (Alzbeta Klein, Director), Climate Finance Stephen Richardson (World Green Building Council). Meng, Rajesh Miglani, Marcene Mitchell, Eloshan and Policy Group (Anup Jagwani, Manager). The authors Their collective wisdom and contributions have Naicker, Shruti Narayan, Alexandrina Platonova-Oquab, are Irina Likhachova, Aditi Maheshwari, and Ayesha dramatically improved the report’s comprehensiveness Tigran Parvanyan, Sandra Pranoto, Randall Riopelle, Malik, with support from Rebecca Menes, Elizabeth and potential for impact. Friedemann Roy, Autif Sayyed, Apoorva Shenvi, Lakshmi ii Green Buildings | A Finance and Policy Blueprint Foreword If you build it, build it green: Green buildings open the door to better business and a cleaner world reen buildings represent one of the biggest investment In addition, green buildings can help investors and owners opportunities of the next decade—$24.7 trillion across manage the risks associated with a transition to a lower- Gemerging market cities by 2030. carbon economy. This transition will bring regulatory, economic, and resource changes, and some energy- Cities in emerging markets are expanding at a fast pace to inefficient assets will no longer be profitable. keep up with high population growth and rapid urbanization. The floor area of the buildings that dot our skylines is expected The private sector, governments, and financial institutions to double by 2060. Most of this growth will occur in residential need to work together to transform real estate, especially construction, particularly in middle-income countries. Meeting in emerging markets, where most of the construction will the demand for new buildings through green construction can happen and where green buildings could have the greatest spur low-carbon economic growth and create skilled jobs in impact. Investors, owners, and tenants are beginning Alzbeta Klein Director, Climate Business, IFC emerging markets for decades to come. to recognize the clear business case and are demanding buildings that can meet tenants’ needs, maximize returns, Investors and financiers