Why it pays to get a green bond

By Steve Brookes, CEO Balwin Properties

Green finance is a structured financial activity, a product or service that’s been created to ensure a better environmental outcome. It includes loans, debt mechanisms and investments that are used to encourage the development of green projects or minimise the impact on the climate of more regular projects - or a combination of both. Green financing plays an important role in delivering sustainable outcomes.

According to World Economic Forum, clean energy sources can be brought to fruition through the right combination of planning, strategic priorities, and availability of capital. Such projects could be given preferential treatment to make them a more attractive option than, for example, fossil-fuel-derived energy infrastructure. International Finance Corporation (IFC), a member of the World Bank, was one of the earliest issuers of green bonds, launching a Green Bond programme in 2010 to help catalyse the market and unlock investment for private sector projects that support renewable energy and energy efficiency. An innovation of the IFC, EDGE (Excellence in Design for Greater Efficiency), was created to respond to the need for a measurable solution to prove the financial case for building green and to help jumpstart the proliferation of green buildings.

Until recently, green bonds on sectional title homes were unavailable in South Africa. Subsequently, with 15 372 apartments EDGE certified and an additional 22 000 registered to be certified, SA’s largest sectional title developer, Balwin Properties, developed a green bond product together with local financial institution Absa Group to offer it to customers at a reduced interest rate. Other financial institutions, including FNB, Standard Bank and Nedbank followed to offer green bonds to their customers. As such, green bonds and EDGE registration assure environmentally conscious customers that they are minimising their environmental footprint while saving on utility costs and lowering the cost of finance over the long term.

To date, more than a thousand green bonds have been secured for clients, with savings in excess of R100 million over the average bond terms due to this innovation. Green bonds recognise that sustainable living is a priority for customers. EDGE-certified buildings feature environmentally responsible designs, including solar electricity, water and energy-efficient appliances, energysaving lighting and natural ventilation, which increases airflow, water harvesting and black water treatment plants. Some of these properties boast carbon-neutral footprints and are 6-Star Green Rated by the Green Building Council South Africa (GBCSA).

The EDGE standard is set at a minimum of 20% reduction across energy consumption, water usage and embodied energy in materials during construction, compared to conventional building methods. EDGE Advance requires an energy consumption savings of up to 40%. EDGE certification for new homes is implemented in South Africa by GBCSA in partnership with IFC.

Projects built to the EDGE standard deliver carbon emissions reductions, water savings and a lower cost of living. Green finance through green bonds provides accessibility to green buildings which is an important catalyst for the green economy.