considering green opportunities hamer
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Janet Hamer, Federal Reserve Bank of Atlanta Jacksonville Branch, Community AffairsSeptember 22, 2009
The comments in this presentation are those of the presenter alone and do not necessarily reflect the views of the Federal Reserve Bank of Atlanta or the Federal Reserve System.
Green for Green:financing for green buildings
Why green, according to New Ecology
Average construction cost: $181/SF
Greening cost: $2-6/SF
Percentage increase for greening: 1.1%-3.3%
Green financing, defined
A system of public and private sector financing mechanisms that promote sustainable development
Green v. traditional financing Traditional
Short to midterm financial outcomes
First costs focus Income & expenses NPV, ROI, IRR, NOI
Green Socially/
environmental expectations
Life cycle cost analysis
Income & expenses NPV, ROI, IRR, NOI Savings
What are lenders doing?
Commercial: Underwriting that accounts of improved NOI,
green-trained staff, encouraging greening Retail:
Green mortgages, reduced closing costs, climate-themed credit cards, car loans with reduced rates for environmentally friendly cars
Operations: Paperless checking, headquarters and
branch greening, employee education
What are appraisers doing?
The components, benchmarking and ratings
Focus on:Energy useWater consumptionWaste
Components, benchmarking and rating systems
Rating systems: In-house systems Third-party systems▪ LEED▪ NAHB▪ Earthcraft▪ Energy Star (recently expanded to
multifamily)▪ Florida Green Building Coalition▪ Many others
Components, underwriting
Green cash flows Energy cost savings (operating) Water cost savings (operating) Faster absorption (if you can prove
market demand) (income) Rental premiums (more true for
commercial than for residential) (income)
Enhanced retention (income)
Components, incentives
Source: 2007 Green Building Survey, National Real Estate Investor and Retail Traffic
Components, incentives
Equity/endowments/mission-based capital Traditional financing Real estate development
Federal▪ New Markets Tax Credits▪ Community Development Block Grants
State Energy Efficiency (http://www.dsireusa.org/)
Federal▪ DOE Weatherization▪ American Recovery Act Program▪ New Markets Tax Credits▪ EE Conservation Block Grants▪ HUD (NSP2 and technical assistance)
Tax credits State and local Utility company rebates/incentives
Water conservation State and local
Barriers to more green buildings
Source: Energy Efficiency in Buildings, World Business Council for Sustainable Development, July 2008
