🍃Green Financing- 👉 Ways to Fund Your Sustainable Buildings

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Okay, on to this week's trend breakdown.

Here’s what you will learn in today’s email:

• What are the available green financing options?

• Who are the top lenders?

• How can developers and investors take advantage?

• What are some example projects?

• What do these green financing options cost?

• And more!

👉 Problem

Sustainable real estate projects often have greater upfront costs that make them difficult to finance and often less financially viable. With rising interest rates, investors are looking for ways to lower the cost of capital and bridge gaps in financing.

⚡ Big Idea

Green financing, or green capital, provides funding for sustainable and energy efficient projects and creates a new market for investors in sustainability. 

📊 Charts and Data

Along with the growth of ESG (Environmental, Social, and Governance) policies and environmental regulations, global green financing options have also grown rapidly. 

C-PACE (Commercial Property Assessed Clean Energy), a program to finance energy efficient commercial projects has also grown to over $3B in total projects funded. 

🔥 Opportunities 

Many green financing opportunities are available for those building or upgrading energy efficient buildings.

Finance Energy Efficient Property Upgrades with PACE

PACE (Property Assessed Clean Energy) financing is a model for financing energy efficient projects. C-PACE is commonly used for commercial and R-PACE is for residential.

• The Sinclair Building in Tulsa, Oklahoma raised $4.3M in C-PACE to fund key energy efficiency upgrades.

• R-PACE has financed home owners with over $3B in energy retrofits

Finance Home Upgrades with Green Mortgages

Green mortgages, or Energy Efficient Mortgage programs, allow you to borrow money to pay for energy efficient upgrades in your home. 

• See list of lenders

Finance Sustainable Buildings and Projects with Green Bonds

Green bonds are issued by a borrower to finance sustainable projects. 

• Digital Realty Trust was the first data center REIT to issue Green Bonds and have become a leading issuer with over $6B. 

• Prologis uses Green Bonds to fund their energy efficient industrial warehouse buildings and renewable projects. 

Invest in Equities with Green REIT ETFs

Exchange Traded Funds (ETFs) give investors exposure to environmentally sustainable buildings and properties.

• iShares ESG Environmentally Aware Real Estate ETF (ERET) seeks exposure to real estate equities with green certification and energy efficiency.

Invest or Raise Green Crowdfunding

Green Crowdfunding gives investors and companies the opportunity to invest and raise capital for sustainable projects.

• RaiseGreen lets you invest in sustainable projects like this private green bond and this community solar project.

💼 Case Studies

• Hospitality C-PACE- Nuveen Green Capital provided over $30M in C-PACE to finance extensive energy efficient upgrades at the Arlo Wynwood Hotel.

• Data center green bonds - Equinix has issued $4.9B in green bonds to allocate to green buildings and energy efficient projects.

• Historic property renovation - The historic Whitney restaurant in Detroit utilized over $800k in C-PACE financing for new HVAC and LED lighting to save over $450k in utilities.

• Multi-family PACE - Greenworks and DC PACE financed $500k of HVAC upgrades for The Brittany apartments in Washington DC.

🤝 Players

PACE Providers

• Nuveen Green Capital is a national leader in C-PACE and sustainable commercial real estate financing.

• Petros provides up to 30% LTV, low-rate C-PACE financing to fund energy efficient projects.

Green Bond Funds

• Calvert offers sustainable investment options, such as the Green Bond Fund

• iShares by Blackrock offers investment grade exposure to projects that promote environmental sustainability with the USD Green Bond Fund ETF

Programs

• Fannie Mae Green Financing

• Freddie Mac Green Advantage

• PACE (Property Assessed Clean Energy) 

✨ Predictions

• Increase in demand for Green Bonds and PACE financing programs as higher interest rates force investors to lower the cost of capital.

• Government support and programs will continue and expand.

  • New and expanded programs, such as the Inflation Reduction Act, will include green building tax incentives

• Emergence of new green financing instruments.

  • Green Crowdfunding helps sustainable projects raise money from individual investors.

⚠️ Risks 

• Energy efficient projects cost savings can be estimated but actual savings are unknown

• Long term financing financing obligations increase financial risk

• Regulatory changes may impact the viability of sustainable projects and green financing options

🧐 FAQ

What types of projects can be financed with green financing?

Green financing can be used to finance all types of environmentally sustainable projects, such as renewable energy upgrades and installations for commercial and residential properties.  

What are the benefits of green financing? 

Green financing can provide a range of benefits, including lower energy costs, reduced environmental impact, improved property values, and access to financing that may not be available through traditional channels. It can also be more affordable than traditional financing; C-PACE is typically half the cost of Mezzanine Debt or Equity.

How do you qualify for green financing?

Each financing program will have sustainability and energy efficiency requirements. For funding your development project or retrofit, please see this Better Buildings Solutions Center resource for more information and lists of case studies and providers.  

✅  Key Takeaways 

• Green financing gives developers and investors the opportunity to fund projects to improve energy efficiency, increase cash flows and raise property values.

• Developers and investors can take advantage of green financing to fill gaps in the capital stack and potentially lower the cost of capital for sustainable projects.

• Public and private opportunities exist to help fund energy efficient projects.

• From residential to commercial energy upgrades and new developments, there are many options for green financing in the capital stack.

🔗 Additional Resources

Alliance Global Advisors Green Finance Report 

Demand for PACE

Incentifind database for LEED real estate incentives

Map of local US incentives

Goldman Sachs - Understanding Green Bonds

Energy.gov PACE Resource

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