Green lending criteria will support low-emission buildings

Well-positioned BC buildings thanks to electrification push

A new construction finance program from Vancity Credit Union encourages green buildings through preferential lending terms.

Vancity quietly launched the low-carbon construction financing pilot late last year. An online information session on March 9, sponsored by the Zero Emissions Building Exchange in partnership with the Urban Development Institute and green design collaboration LFV Solutions, will mark its public debut.

“What we’re trying to do with [the program] is to try to encourage low-emission and more climate-resilient buildings,” said Alison Coates, director, climate strategy and performance, at Vancity. “As part of this, we will seek to encourage the construction of a building without using fossil fuels for heating, water heating and cooking, and we will also look at embodied carbon and… [consider] future climate scenarios.

Buildings that do not require fossil fuels for heating or cooking (except in emergencies) will be eligible for preferred financing terms, including reduced interest rates and fees, extended amortization periods and higher loan-to-cost ratios.

Buildings designed with 2050 climate projections and those that submit life cycle carbon assessments will also be eligible for preferential financing terms.

Coates hopes next week’s briefing will generate interest from builders who would like to take advantage of the program.

The initiative aligns with Vancity’s participation in the Partnership for Carbon Accounting Financials, which was established three years ago. PCAF includes 228 financial institutions worldwide that have committed to measuring and disclosing greenhouse gas (GHG) emissions in their loan investments. It includes 15 Canadian-based lenders managing over $5.8 trillion in assets.

In addition to Vancity, the country’s five major banks, the BDC and the Investment Management Corporation of Ontario are members of the PCAF. BC Investment Management Corp., which manages the province’s public sector pension funds, is not a member, but has not ruled out the possibility of joining.

Vancity is among the lenders that have already issued statements regarding the investments. Its first statement, released last May, noted that its $18.6 billion in real estate-related loans represented the largest volume of issues tracked.

However, home loans were relatively healthy compared to auto loans. Vancity reported 9.6 tonnes of issuance per dollar of commercial real estate financing versus 179 tonnes per dollar attributed to auto loans.

“The advantage we have in BC is that we have a clean electricity supply, so the message is a little different,” Coates said. “It’s about electrification and switching.”

Vancity will release its second report this spring. RBC has committed to reporting the carbon emissions associated with its loans for this fiscal year in 2023.

Other institutions will follow, with funding terms promising to swing in favor of green buildings in the years to come.

“Today, GHG emissions have no discernible impact on the availability or cost of financing, but that is expected to change,” Paul Morassutti, vice president of brokerage CBRE Ltd, said this week. in the company’s 2022 outlook presentation. “[PCAF] will have significant impacts on commercial real estate as lenders will need to report and include GHG emissions for the assets on which they terminate. The price and availability of debt will reflect this.

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