Australia needs to electrify 500 homes every day and triple the pace of retrofitting non-residential buildings to meet its 2050 target of net zero operational carbon emissions, a new Green Building Council of Australia report shows.
Funding the change – which also includes boosting the energy efficiency of 100 homes each day and accelerating the retrofitting of commercial property to 3.5 per cent of stock annually from the current 1 per cent – will cost as much as $4.6 billion a year, the council says.
But there is no shortage of capital to invest in such energy efficiency in a global investment universe that – according to Bloomberg – last year raised, for the first time, more debt funding ($US580 billion, $910 billion) for climate-friendly projects than for fossil fuel companies ($US530 million).
The problem for Australia, which chalked up just $US2.5 billion last year – or 2 per cent of global sustainable finance earmarked for real estate projects – is a lack of understanding between sustainability and finance types that holds back the development of these lending streams, council chief executive Davina Rooney said.
“This is an area where neither side understands each other particularly,” Ms Rooney told The Australian Financial Review.
“A major part of the reason why we’re not seeing more movement at scale is confusion in the current market. People haven’t been sure which pathway to get their finance certified as green.”
The council, along with the not-for-profit Australian Sustainable Finance Institute, has now produced a guide to make it easier for the industry, with the idea of doubling the country’s $2.5 billion in sustainable real estate financing over the next decade.
Davina Rooney, CEO of Green Building Council of Australia. Louie Douvis
“This is trying to take the friction out of green finance,” Ms Rooney said.
“It’s making the sustainable property industry more aware of financing opportunities and making those in the finance industry more aware of how exactly that translates into sustainability of a project and what mechanisms you’ll use to transact.”
The guide describes sustainable finance instruments currently in use, reviews green building certifications, benchmarks and rating tools and explains how they can assess the green credentials of a project and whether a project is likely to be eligible for sustainable financing.
The country had about 10.9 million homes as of June last year – and this is expected to increase by 43 per cent by 2040, the council says. The 500-plus home-a-day target is necessary to convert 200,000 dwellings each year, it says.
As many as 5.2 million existing homes are connected to piped gas and another 1 million use propane, or bottled gas. Hence, improving the energy efficiency of existing homes and converting buildings to renewable energy use will also require funding.
In July, Victoria – which accounts for about 65 per cent of all household gas usage – said it would ban new domestic gas connections from next year. In August, City of Sydney, a local government area with 218,000 people, said it would consider banning gas connections to new homes.
Last year, the City said new developments had to achieve net zero carbon in their energy use from 2026.
Cutting gas from households would also save money – the collective annual bill for maintaining gas connections was $1.3 billion, the council said.
Office, retail and other commercial space already account for more than 859 million square metres, and this is likely to double by 2050. To ensure the country’s 2050 net zero target is met, as much as 3.5 per cent of current non-residential stock – up from the current 1 per cent – had to be retrofitted each year, the council said.
“This would mean increasing the current rate of investment in retrofits from $500 million to about $1.5 billion to $2 billion,” it said.
Australian Sustainable Financial Institute CEO Kirsty Graham. Renee Nowytarger
The institute is developing a so-called taxonomy, or set of rules, that can be applied consistently across Australian industries and companies to assess sustainability in ways that investors and consumers can understand.
With that framework still the best part of two years away from completion, it was important for Australia’s property industry to get clarity now – based on standards mostly set in Europe – about what it could do to get green funding and how to go about it, Ms Rooney said.
“It’s the first step along a defined pathway,” she said. “We’re jumping in and showing the global alignment that already exists. This has always been about connecting Australia to the world.”
The institute’s CEO, Kirsty Graham, said Australia’s built environment sector needed a supportive ecosystem.
“This includes working together to establish common definitions and approaches for sustainable finance that are environmentally credible, understood and useable by industry, and interoperable with global standards,” Ms Graham said.
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