Green Building and Infrastructure Fund 2006
Vancouver Olympic
Organizing Committee (VANOC)
City of Vancouver
Vancity
BC Hydro
Tides Foundation
Buildings are one of the largest consumers of resources
on the planet. Buildings currently account for about 30-40%
of energy consumption and are a significant source of
pollution. Buildings in Canada produced about 19% of
Canada’s total GHG emissions in 2004 (including indirect
emissions from electricity use). Compass completed this
multi-client study to assess the issues and opportunities
for a green building and infrastructure investment fund to
cover any capital cost premium associated with higher
performance buildings and infrastructure.
One of the first challenges was how to define green
buildings and infrastructure. These are typically
characterized as buildings and infrastructure that use fewer
resources, produce less waste and have higher quality then
those built to existing regulations or using common
construction practices. There is currently no formal
standard for green infrastructure. The most common voluntary
certification standard for green buildings in North America
is the Leadership in Energy and Environmental Design (LEED)
system developed by the United States Green Building
Council, and adopted for use in Canada by the Canada Green
Building Council.
We used this standard as a basis for assessing the
construction costs and operating cost impacts of green
construction. These vary greatly across sites and
jurisdictions. The study is based on averages from recent
construction databases and modelling exercises, and uses
energy savings and costs specific to the communities of
Whistler and Vancouver, host cities to the 2010 Winter
Olympics. Energy and water savings are the easiest impacts
to monetize. The study shows that based on these savings,
LEED certification generates a positive return. The return
declines with higher levels of certification, reflecting
increasing capital costs and diminishing savings for higher
levels of certification, in particular LEED Platinum.
Returns are also higher at all levels of certification in
Whistler compared to Vancouver, which reflects the higher
energy requirements of buildings in a location such as
Whistler.
The study suggests a need for green real estate
investment options among the socially-responsible investment
community. While there are some real estate investment
companies and trusts committed to corporate social
responsibility and sustainable development in the U.S.,
Europe and Australia, no similar funds currently exist in
Canada. In addition to screened investments, there is also a
need for more long-term, stable yield type investments among
conventional investor pools such as pension funds. Green
developers have not found access to capital to be a major
constraint in their projects to date. However, green
development is still a small (but growing) portion of total
development activity in North America.
The research demonstrates that the most likely ways for
investors to recoup their incremental investment in green
attributes is through long-term ownership of green buildings
(e.g., office, retail, rental housing and/or social housing)
or specific assets within a green development (e.g.,
equipment or utility infrastructure). Ownership would permit
investors to recoup their investment directly through lower
operating costs, higher lease rates, lower vacancy levels
and/or ongoing lease or utility payments. The lack of
existing green properties that could be acquired suggests a
fund would need to be involved in the development of new
buildings. The study suggests that a fund would need a
minimum size and level of diversification to absorb set-up
and ongoing administrative costs, and to reduce investment
risks. A fund would need to focus initially on institutional
investors to achieve sufficient scale and manage set-up and
administrative costs. Given the limited number of existing
green buildings, a partnership with a developer is likely
required (as illustrated in the recent Hines / Calpers
partnership). A partnership with a large retail or office
tenant and with a corporate commitment to lease green
premises could provide significant stability and credibility
for a fund.
Contact: Trent
Berry, Partner, Compass Resource Management Ltd.
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Compass Resource Management Ltd
200 - 1260 Hamilton St.
Vancouver, B.C. V6B 2S8
Canada
Phone: 604-641-2875
Fax: 604-641-2878
www.compassrm.com
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