It will not have escaped the sector’s attention that this year’s UN Climate Conference, COP26, is the first to dedicate a day to the built environment. Addressing how developers can tackle a net zero emission future is sure to be a central part of this.
This is not a new conversation. Sustainability has for many years been at the forefront of development strategy, with legal requirements focusing on the protection of our environment. This, coupled with mounting public pressure for large companies and organisations to reduce their carbon footprint, is changing the face of development.
The barrier the industry has faced is in financing the delivery of green infrastructure, which often comes with a hefty cost. How can developers fund sustainable projects while remaining commercially viable? The good news is that funding sources for green development exist, and they are imperative for moving the net zero agenda forward. But this is not often fully understood, and therefore not utilised to its potential.
Three available solutions for developers to gather capital are social loans, green loans and sustainability-linked loans, all of which have evolved in recent years as central banks aim to encourage sustainable development in the built environment.
Social loans – outlined in the Social Loan Principles – support development that mitigates social issues and achieves positive social outcomes, including sustainability.
Similarly, green loans – Green Loan Principles – are granted to support developments that are set to have an environmental benefit. The developer commits to invest the funding in specific projects, such as energy-efficient buildings, facilities to promote pollution prevention and generate clean air and retrofitting existing properties to reduce emissions.
Finally, sustainability-linked loans – Sustainability-Linked Loan Principles – are dependent on the developer committing to certain conditions and criteria for development before receiving the funding. To borrow, the company or organisation must demonstrate that the project will achieve a minimum sustainability target.
Of the many topics set to be debated at COP26, the role of the built environment in meeting net zero targets is a sure one, and proper use of funding to meet these objectives should be front and centre of the conversation.
Anita Kasseean is partner at Blake Morgan