Commonwealth Bank Deploys Green Loans for Sustainable Upgrade of Commercial Real Estate

Green finance continues to accelerate in the commercial real estate sector with the launch of a new loan encouraging homeowners to modernize buildings to cut emissions by 30%.

The Commonwealth Bank of Australia announced Thursday that landowners could extend their commercial real estate loans by up to 20%, with no line fees and no set-up fees, to pay for major sustainability improvements.

This is the first loan of its kind offered to the commercial real estate industry by a major retail bank.

To be eligible, buildings must achieve a star rating improvement under the Australian National Built Environment Rating System (NABERS) or reduce the property’s carbon emissions by 30%. A three star rating is considered “average” for energy efficiency, while six stars is the highest rating given to market leaders in the field.

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Many players in the commercial real estate industry are already responding to changing demand among tenant businesses and investors seeking greener real estate assets.

“A number of our clients have already started their journeys and are already doing this work,” said Michael Bennett, general manager of real estate and construction finance for CBA. “It’s to encourage the customers who are sitting on the fence now.”

In Australia, buildings account for more than half of electricity consumption and almost a quarter of emissions.

More than half of all office buildings score below five stars on the NABERS energy system. Photo credit: Louis Douvis

ABC’s chief business loan officer Clare Morgan said the sustainability improvements made business sense because they could increase property values ​​while lowering operating costs.

“We understand that this is a difficult time with some buildings experiencing reduced foot traffic or a lower occupancy rate; However, for some businesses it has become the perfect time to undertake building upgrades and property improvements, and we have already seen strong demand, ”said Morgan.

Almost two-thirds of commercial office buildings are currently rated below five stars for their energy use, she added.

The NABERS system analyzes a building’s energy efficiency, water consumption, indoor air quality, waste management and carbon emissions.

“The only way to get a better NABERS score is to use less energy,” said Carlos Flores, director of NABERS. “If you install flashy technology that looks really good but doesn’t reduce energy and carbon emissions, it won’t help the environment, and it won’t get you better. NABERS note. “

Upgrades could include installing solar panels, battery storage or water recycling systems, as well as upgrading ventilation, insulation or window design.

“Reducing emissions by 30 percent in just a few years requires a lot of concerted effort,” Flores said. “This is not going to happen by accident. ”

“Sometimes that requires upgrades, like replacing LED lighting or old air conditioning equipment. And sometimes that requires improvements in the way we manage the building, like making sure all equipment is turned off when not needed. Often it is about doing both.

The fine print of the loan agreement will act as an “environmental KPI”, with energy targets to be achieved within a certain time frame.

“For example, if your building was operating at a NABERS energy rating level of three stars, then it would need to set a goal to achieve at least 4.5 stars by a certain date,” Flores said.

While offices and shopping centers received the most NABERS ratings, the system can cover apartments, hotels, data centers, hospitals and will soon include the retirement homes and retirement homes sector.

“What is the particularity of this [new loan] is that it is large in size and open to many different parties, ”Mr. Flores said. “This is a debt instrument designed to drive lasting change across the industry. “

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