Green buildings reduce or eliminate negative impacts on the environment and climate. They can be tied to carbon and energy objectives such as net-zero emissions, as well as considerations for people’s health and well-being.
Investing in green buildings allows market players to manage potential risks that stem from the global transition to low-carbon economies. Globally, the buildings sector consumes more than half of all electricity for heating, cooling, and lighting and accounts for 28% of energy-related greenhouse-gas emissions, according to the IFC.
The report, titled “Green Buildings: A Finance and Policy Blueprint for Emerging Markets,” notes 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 highlights the financial benefits that the investors, banks, developers, and owners, including governments, can expect when entering the green building market.
The estimated $24.7 trillion investment potential in green buildings between 2018 and 2030 in emerging market cities will be mainly due to the sharp increase in building construction expected over the next few decades and the opportunity to ensure that these buildings are built green.
The report notes that there is a strong business case for growing the green buildings market. Emerging evidence indicates that green buildings, or buildings that use energy and water more efficiently, are a higher-value, lower-risk asset than standard structures. While building green could range from savings of 0.5 to 12% in additional costs, green buildings can decrease operational costs by up to 37%, achieve higher sale premiums of up to 31% and faster sale times, have up to 23% higher occupancy rates and have higher rental income of up to 8%.
As per the report, more than half of the 4.1 billion people projected to live in urban areas by 2030 are expected to be in South Asia and the East Asia Pacific regions, and their accommodation will require additional residential and commercial building floor space. The East Asia Pacific region alone will present an investment opportunity of $16 trillion in green buildings.
In India, the situation is no different, as it alone will need an estimated 60 million additional housing units to be built between 2018 and 2022 to meet the existing shortfall. To meet the demands, the Indian government has launched “Housing for All” by 2022, a policy that aims to bridge the gap in urban housing with increased private sector participation.
It is important to note here that since December 2015, 194 countries have submitted national plans that highlight the governments’ framework for reducing emissions through climate solutions, including renewable energy and low-carbon cities.
The report adds that India’s National Development Council is focused on the building sector based on energy conservation, pledging to make its Energy Conservation Building Code (ECBC) stricter, highlighting its domestic building rating system GRIHA (Green Rating for Integrated Habitat Assessment), which scales energy efficiency in buildings.
The best way to reduce the use of conventional resources during a building’s life is to integrate green measures during its design and construction. For example, India updated its Energy Conservation Building Code (ECBC) for commercial buildings in 2017 and its ECBC-R for residential buildings in 2018. The ECBC now includes energy performance standards for commercial buildings, requires renewable energy sources to be integrated into building design, and makes it mandatory for new buildings to demonstrate energy savings of at least 25% to be code compliant.
India’s Perform, Achieve, and Trade program is a regulatory cap and trade instrument that aims to reduce energy consumption in specific energy-intensive sectors using a market-based mechanism through which consumers can get certification for and trade excess energy savings. The program was initially created for large industrial businesses, but later it was extended to hotels for the year 2020–2021.
The report further notes that the increased uptake of green bonds in several markets is mainly because central banks and regulators are providing clear guidelines on how to issue these bonds.
The People’s Bank of China published its “Green Bond Guidelines” in 2015. Similarly, India, the Association of Southeast Asian Nations, Chile, Peru, and Egypt are only a few other examples of countries that have issued green bond guidelines.
The Indian corporate is also playing its part in promoting green buildings. Led by the CEOs of leading developers and financial institutions, the Sustainable Housing Leadership Consortium is a first-of-its-kind voluntary private sector consortium that aims to mainstream green buildings in India. The consortium is working towards building and certifying all of its new housing as green, contributing 110 million square feet of green housing by 2020.
Earlier this year, according to a smart city indicator survey conducted by Ireland-based multinational, Johnson Controls, India had only 4% of the building that can be classified as ‘green.’ However, the survey pointed out that 38% of buildings in India want to get the ‘green building certification’ in the future as compared to the global percentage of 44. Around 46% are willing to pay a premium to lease space in a certified green building in India as compared to 51% in the world.
Previously, the Bureau of Energy Efficiency and the Central Public Works Department signed a memorandum of understanding kickstarting their cooperation to promote energy efficiency in buildings. The MoU will remain in force for five years unless rescinded by either party. According to the MoU, BEE and CPWD will cooperate on promoting designs and construction of Energy Conservation Building Code (ECBC) compliant new buildings, star rating of CPWD managed buildings across the country with no registration or renewal fee, awareness on energy efficiency in building sector and support for capacity building of CPWD officials in ECBC.
Rakesh is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU).