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Grace Kwok

Green strategy: plenty of effort is needed for Hong Kong’s buildings to be eco-friendly

Biggest task lies in convincing a developer or landlord that the long-term benefits and cost-savings justify the extra costs of building or retrofitting existing properties into certified green buildings

Jimmy Chow

Grace Kwok is chairman and executive director of the Allied Sustainability and Environmental Consultants Group. She discusses how green building certification can help property owners.

What are the driving factors behind the green building movement in Hong Kong? What considerations do developers take into account when pursuing green building certification?

Motivation can generally be divided into the stick and carrot categories. The stick elements are compliance or regulatory requirements through legislation, such as building codes, corporate governance or financial penalties. In Hong Kong, there are no green building-related regulations and it is mainly the carrot elements that drive developers to go green, in particular, the “bonus” gross floor area developers are entitled to after achieving BEAM Plus certification on newbuilds. Other less apparent carrot elements typically take the form of improved property values [such as green value], better living or working environment, health benefits for occupants and residents, and branding opportunities. Many multinational corporations, especially those headquartered in the United States, implement sustainable initiatives as part of corporate social responsibility programmes. These companies would prefer renting a qualified, LEED-certified, office space. So to attract multinational corporations as long-term tenants, office developers are more willing to pursue a green building rating or certification. There are also more institutional investors committing capital to companies that show socially and environmentally responsible investment.

Are owners of existing buildings less motivated to go green on their premises?

Retrofitting an existing building and turning it into a certified green building takes into account energy, water and materials, plus cost considerations such as the occupant’s well-being, environmental performance such as a reduction in carbon footprint and what economic returns can be reaped. For a large, multidisciplinary developer, it usually starts with office buildings, because the cost-savings, environmental performance and economic benefits are more obvious. Besides meeting the corporate social responsibility requirements of multinational corporations, a green building may help increase the tenant company’s productivity, by reducing absenteeism and retaining employees; improve employees’ physical health and psychological well-being; improve stakeholder relations and increase investor interest. All these tenant benefits translate into a developer or landlord’s pricing power to command higher rents relative to non-green buildings in the long term.

How do you convince a developer or landlord that the long-term benefits and cost-savings justify

the extra costs of building or retrofitting existing properties into certified green buildings?

We use computerised energy modelling tools to show a developer how an energy efficiency target can be met through building design. In doing so, we analyse the financial returns to a green building development or renovation project. Then we work out the additional building costs incurred by meeting the green building standards compared with a conventional project. Then we look at how much this additional upfront investment, or “green premium”, can generate in annual savings, mostly from reduced energy expenditure, and how much time it will take to break even. Energy modelling can help optimise the building design and support design team decisions that yield the greatest efficiency in the building’s energy use. Modelling has its limitations as some uncertainties are difficult to predict, [such as] inflation. Therefore, it estimates energy use under certain scenarios.

Top developers knowthe benefits and operational savings of high-performance green buildings. What about small- and medium-sized developers?

Top developers have known about the benefits since the 1990s . Smaller developers are less motivated to build green. Apart from resorting to making green building certification mandatory, I think we need more incentives. The Hong Kong stock exchange’s compliance requirements, effective 2016, on listed companies to disclose their environmental, social and governance performance may at least help promote greater awareness in sustainability among smaller listed builders.

This article appeared in the South China Morning Post print edition as: Motivation plays a crucial role