Our industry is engaged in an important dialogue to improve sustainability through ESG transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.
As our planet faces increasing environmental challenges, governments around the world are stepping up their game to combat climate change and promote sustainability. Decarbonizing the built environment, which contributes to around a third of global emissions, is crucial to achieving net-zero goals.
Governments have shown a clear commitment to “constructing responsibly,” with the building industry being highlighted in 136 countries’ Nationally Determined Contributions (NDCs). However, complying with new regulations that mandate lower emissions and greater energy efficiency remains a challenge for building owners and property managers.
This article explores three types of incentives that help buildings keep up with sustainability regulations using global case studies.
- Financial Incentives, such as tax credits, fee reductions, grants, and loan funds
- Structural Incentives, such as expedited permitting processes and density bonuses
- Educational Incentives, such as technical assistance and marketing assistance
Financial incentives
Financial incentives are essential to achieving compliance with new green building regulations as they alleviate the upfront cost burden and provide tangible rewards for sustainable building practices.
Singapore is one of the most densely populated cities in the world, but it also has one of the most
carbon-efficient economies. To support green building systems, the Singapore Government has provided an enabling environment with strategic policies and incentives. The Green Mark Incentive Scheme offers cash or gross floor area incentives to encourage the adoption of green practices. This initiative is set to run from June 30, 2022, until either the full allocation of the SGD 63 million in funds has been committed, or until March 31, 2027, whichever occurs first. The government also passed new legislation, mandating that new constructions and existing buildings undergoing significant retrofitting adhere to a specified minimum standard of environmental sustainability. “Such government intervention — in the form of a carrot-and-stick approach using a combination of incentives and legislation — is critical to accelerating the transition to net-zero carbon,” says Andrew Macpherson, Head of Asset Development, Asia Pacific, JLL.
In the United States, financial incentives for climate action have reached an all-time high with the passing of the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA), which contain approximately USD 370 billion worth of tax incentives, loans, and grants to improve energy efficiency and climate resiliency. It has been predicted that the IRA and IIJA will help reduce US climate pollution by as much as 40% below 2005 levels by 2030. However, their success will depend on the implementation measures taken by state and local leaders. The Environmental Protection Agency (EPA) announced that it will open a USD 4.6 billion implementation grant competition in late 2023 to support implementing policies, programs, measures, and projects in some of the subnational climate action plans created in the planning stage of the program. We look forward to seeing how these acts will drive policies to decarbonize the built environment in the United States.
Structural incentives
Structural incentives play a pivotal role in driving the adoption of green building practices by simplifying construction processes and enhancing cost-efficiency. An example of a structural incentive is a density bonus, which gives green building owners permission to build additional floors beyond the usual limit for conventional buildings and can consequently translate into increased revenue potential for building owners. Expedited permitting processes are another form of structural incentives which are granted to buildings with green goals and help streamline the construction process by reducing bureaucratic delays.
Peru has demonstrated remarkable progress in municipal building ordinances aimed at advancing green construction practices. Notable examples include San Borja 623-MSB and Miraflores 539-2020, which offer incentives like height bonuses and flexibility in urban parameters for buildings certified under green standards such as LEED, EDGE, or BREEAM.
Educational incentives
Technical assistance allows building owners to navigate the complexities of green building regulations more effectively, enhancing project feasibility and reducing environmental impact.
New York’s Accelerator program provides free technical assistance to over 9,000 buildings, helping building owners comply with local laws and avoid fines. Services that the program offers include personalized technical assistance from a dedicated account manager, free online trainings on energy technology and NYC building laws, and an expert that helps provide information on financing options, financial incentives, and referrals to service providers.
“Our city needs to deploy all tools in its toolbox to effectively implement our landmark Climate Mobilization Act,” said New York City Comptroller Brad Lander. “The ‘NYC Accelerator’ is an important resource that provides building owners with free access to technical assistance for identifying retrofit strategies and financial incentives for their building to be compliant with Local Law 97 and meeting our ambitious emissions reduction goals.”
Broader implications of incentives, beyond compliance
The use of financial, structural, and educational incentives to promote sustainability in the built environment not only supports building owners in complying with regulations, but also has broader implications for businesses and their reporting to entities like GRESB. Incentives can be strategic tools for companies to diversify and decarbonize their portfolios, ultimately enhancing their reputation and scores in sustainability reporting.
The examples outlined in this article demonstrate the power of incentives for decarbonizing the built environment. Further action needs to be taken from governments around the world to promote more incentives, and to ensure the uptake of the incentives from building owners and property managers.
This article was written by Annika Prinz, Sustainability Analyst at WatchWire.
References:
- Singapore’s green buildings
- Good to know: Green building incentive strategies
- Free technical assistance with energy and building upgrades
- How governments are supporting the pursuit of greener buildings
- S$63m green mark incentive scheme encourage building owners to green existing properties
- Mayor Adams launches campaign to promote green buildings, establish as NYC as national leader in energy efficiency
- Green buildings a finance and policy blueprint for emerging markets
- Implementing America’s clean energy future
- Green building incentive programs
- Non-monetary incentives for green buildings
- Peru green building market snapshot 2019