According to the IEA, the buildings and construction sector accounted for 36 percent of final energy use and 39 percent of energy and process-related carbon dioxide (CO2) emissions in 2018, 11 percent of which resulted from manufacturing building materials and products such as steel, cement and glass. At times and depending on the circumstances, retrofitting an existing property may be more beneficial (from both cost and environmental standpoints) than new construction. A May 2022 report by the American Council for an Energy-Efficient Economy (ACEEE), estimates that comprehensive retrofits of commercial buildings can achieve up to 40 percent energy savings compared to single-measure improvements. Architect Carl Elefante explains that “[r]etrofitting existing buildings to improve their performance can achieve energy efficiencies equivalent to new buildings, substantially reducing operational emissions while avoiding the immense embodied emissions from constructing a new building.” According to Holland & Knight, green renovation also comes with public health benefits such as improved indoor air quality and reduced exposure to carcinogens and other harmful substances. Green financing is often used for retrofit projects.

UK law firm TLT defines green loans as “a financial product that’s specifically designed to fund green projects (as defined in the Loan Market Association’s (LMA’s) Green Loan Principles), and which offers borrowers [favorable] terms in order to [incentivize] them to spend money on sustainability improvements, thus helping the lender to meet its own green finance targets.” Green bonds are often used to finance climate-friendly projects and fund green loans. According to the U.S. Department of Energy, a green bond is “a fixed income debt instrument in which an issuer (typically a corporation, government, or financial institution) borrows a large sum of money from investors for use in sustainability-focused projects.”

In 2022, China issued the highest amount of green bonds aligned with the commonly accepted global definition, totaling $76.25 billion, followed by Germany with $60.77 billion, according to S&P Global (reporting data from Climate Bonds Initiative). California-based logistics REIT Prologis, which estimates that 2.5 percent of the global GDP passes through its warehouses, has issued 16 green bonds and three green private placements of debt in the past four years, according to the U.S. Green Building Council (quoting Tim Arndt, chief financial officer at Prologis). Prologis boasts over 240 projects using LEED, according to the report.

A World Bank report provides examples of strategies used by lenders to improve and increase green financing.

Last Updated on February 16, 2023 by Ramin Seddiq