Lack of energy efficiency data holding back green building finance products in China, Sustainable Fitch says
- A lot of green buildings have been certified on design, but not on operations, Sustainable Fitch analyst says
- Mortgage-backed securities for green buildings have been limited to commercial structures so far
This is despite various levels of government establishing green building standards, setting targets and offering subsidies to support the sector.
A five-year plan unveiled by the Ministry of Housing and Urban-Rural Development in March, for example, aims for the full implementation of green building standards in all new residential and public buildings by 2025.
It also set national targets for the renovation of existing buildings to improve their energy efficiency, and the installation of solar and geothermal energy facilities. The policies form part of the government’s plans for peaking carbon emissions by 2030.
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About 94 per cent of certified green buildings in China were labelled only for design, while only 6 per cent were confirmed to be operationally green, Jia said in a report in September, citing research by the China Association of Circular Economy. “While the number of green buildings is increasing rapidly, doubts about their green credentials have been raised,” she said in the report.
The alliance recommended that the China Green Building Label and the international Excellence in Design for Greater Efficiencies standards be recognised by Beijing to attract international investment.
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Lack of verification through post-construction monitoring of buildings’ energy savings was to be blamed. “Due to difficulties in verifying whether green buildings that had achieved design targets still met requirements during actual operations meant subsidies were rarely actually disbursed,” the report said.
It is also difficult for investors to build in energy-saving and carbon-emission-reduction benefits in any offers they would make to buy such buildings, it added.
Most Chinese banks – except a few small local ones – have yet to incorporate residential buildings’ green features in their mortgage lending decisions due to the absence of vigorous certification standards, Jia said last week.
This is despite the potential for banks boosting their green finance activities being huge, since home loans account for nearly a fifth of their overall lending.
While mainland financial institutions have shown a growing interest in issuing mortgage-backed securities for green buildings, such issuances have been limited to commercial ones so far, Jia said.
Mortgage-backed securities are securities backed by a collection of property mortgages. They are typically sold to investors seeking regular income from cash flow derived from mortgage repayments.
TUV, BRE and the UK-based carbon reduction verification body The Carbon Trust are among nine cross-industry organisations that have launched a joint initiative to develop the UK’s first net-zero carbon buildings standard.
“Through such discussions, we can develop more consensus-based and broader standards,” Rakesh Vazirani, TUV’s global head of sustainability assurance, told the Post last month at the ReThink HK conference in Hong Kong.