Brookfield Place, Perth

A climate bonds standard for low carbon buildings has been officially launched in London.

The standard allows independent verification of a property asset’s sustainability value, providing investors certainty around green investment.

Rules in the standard include criteria for commercial buildings, residential buildings and upgrade projects, and require a building to be in its respective city’s top 15 per cent of performers regarding carbon emissions or for cuts of over 30 per cent in emissions to be made through energy efficiency investment.

Rating systems like NABERS are also be able to be used to verify a building’s performance.

The first green bond certified under the new standard was Australia’s own Brookfield Place in Perth, with the bond issued by the ANZ Bank.

Buildings our biggest carbon cutting opportunity

Che Wall, who was lead expert of the low carbon property technical working group for the standard, said buildings were the biggest opportunity for reducing city carbon impacts.

“Greenhouse gas impacts of cities are enormous and 70 per cent of a typical large city has impact locked up in buildings,” Mr Wall said. “If we are to stand any credible chance of greenhouse gas abatement, we need to look to those buildings as probably our biggest opportunity.”

Mr Wall said having a verifiable standard was extremely important because the property asset class was worth trillions, however there was a lack of accountability around environmental impacts.

“What the Climate Bonds Standard does is creating an opportunity for the property market to enable the investment dollars to go towards greener buildings,” he said.

For a bond to be certified for a low-carbon commercial building, funds raised under it must be used to finance or refinance commercial buildings whereby:

  • The average of the portfolio needs to be in top 15 per cent of the local market to qualify where financing is attached to the underlying performance of the portfolio and performance is maintained over the life of the bond
  • Or their carbon performance is improved over the term of the bond, to achieve a level of carbon performance equivalent to maintaining the Climate Bonds hurdle for the life of the bond (the ambition set under the methodology is an ongoing improvement trajectory calibrated from local market performance towards zero carbon by 2050)

Where there is no city building performance baseline, buildings qualify under the Climate Bond Standard if:

  • They have achieved LEED gold or platinum certification, or equivalent under other building standards such as BREEAM and Green Star, within the last five years, and achieve a minimum 30 per cent emissions improvement against ASHRAE 90.1 criteria (a part of the LEED standard) or equivalent stringency of additional emissions improvements under other building standards
  • Or meet the carbon hurdles set in the IFC’s Edge tool and the green bond linked to the building has a maximum term of six years

For residential, the portfolio must comply with Climate Bond Standard-approved building codes, which currently include the UK Code for Sustainable Homes, 2013 Title 24 California Building Code and the Bouwbesluit 2012 Netherlands. If a residential portfolio does not comply with these codes, it must demonstrate that compliance with a different building code would place the portfolio in the top 15 per cent of the local market.

For upgrades, carbon reduction must be equivalent to 30 per cent over a bond tenor of five years up to 50 per cent for a bond tenor of 30 years.

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