Galley Eco Capital helps Helsinki to reduce carbon emissions
San Francisco-based sustainable finance consultancy Galley Eco Capital was announced as part of a winning team for the redevelopment of the Jatkasaari district in Helsinki, Finland, which will be an urban zone with low or no carbon emissions.
Sitra, the innovation agency of the Finnish government, revealed today that the winning team for their “Low2No†development design competition was made up of Arup, Saurbruch Hutton, Experientia and Galley Eco Capital. The multi-national team was selected out of 74 initial entries, for their “C_life – City as Living Factory of Ecology†project.
Galley Eco Capital brings their unique perspective as an international sustainable finance consultancy with a focus on creating green and socially responsible finance and investment programs. Galley Eco Capital’s work complemented the architectural and consumer behavioral aspects of Jatkasaari by contributing new ways for finance to transform both the district and Helsinki market, to positively impact people’s lives.
The competition jury stated that the innovative monetary/economic model presented contributed significantly to the team’s clear top-down as well as a bottom-up strategy for leveraging the Jätkäsaari opportunity, in the spirit of the Low2No challenge.
Sustainable finance for Jatkasaari and Helsinki
While other team members devised the design, energy and consumer behavioral strategies for the project, Galley Eco Capital’s responsibility was to create an economic and funding model, which would support the project by integrating traditional and socially-responsible capital sources and products at a regional market level and set the right incentives to achieve maximum effect in terms of emissions reduction, energy efficiency and resource savings.
Starting with a thorough analysis of Sitra’s environmental and socially-responsible real estate objectives, the Finnish climate change agenda, and Finland’s participation within the global environmental finance markets, Galley Eco Capital developed ways to create a reliable pipeline of green mortgage, environmental, energy and carbon finance capital for Jatkasaari.
These products would all seamlessly connect with the traditional Finnish financial network to form a holistic financial system. Delicate synthesis was also required to create a flexible market structure, which would monetize available sustainability benefits while adequately funding the Jatkasaari project throughout construction and operation.
About Galley Eco Capital
Using their expertise in designing and implementing sustainable finance and investment programs, Galley Eco Capital’s strategies help investors, lenders and regional governments to bridge traditional with green finance and efficiently monetize the available sustainability benefits embedded within their real estate and renewable energy initiatives.
Galley Eco Capital’s unique approach assures more successful solutions through the application of interaction design principles, driven by culturally-aware, user-centric perspectives and underpinned by long years of international real estate and capital markets experience.
The strategies help drive positive change by:
- developing debt and equity financing structures based upon the value-add contributed by sustainability and energy efficiency,
- synthesizing traditional with emerging green financial products into holistic financial solutions,
- sourcing and structuring incentives and government subsidies to offset program costs,
- designing and monitoring sustainable investment performance measurement to assure positive program impact
Over the next 6 years, the Jatkasaari district will be designed, constructed and opened to the public. From there, the sustainable ideals that govern its day-to-day life will act as a model and example for the rest of Helsinki, Finland and the world. Through Galley Eco Capital, San Francisco will be a vital part of this journey.
For more information on the Low2No project, or on Galley Eco Capital, contact Lisa Michelle Galley, Managing Principal, at +1 415 655 6668, or via email at “lisa at galleyecocapital dot comâ€.
5 Proven Policies to Bail Out Mother Nature and Boost Green Building
Even as the Federal government invests in energy efficiency and conservation, by announcing the award of $3.2 billion in block grants (including $1.9 billion to cities and counties) last Friday, environmental leaders are looking ahead and pushing for more sweeping action — calling on a “climate bailout” in today’s NYTimes Op-Ed.
You heard it — a climate bailout.
Friedman’s op-ed shares the perspective of Hal Harvey, head of ClimateWorks, about his five top policy picks that would help the US to decisively address the energy-climate challenge that we’re only just starting to collectively understand.
The main point about all of these suggestions is that they already are in place somewhere, so they’re proven. No need to reinvent the wheel.
We like thinking about how commercial real estate capital markets would view real estate risk and returns of green buildings if these policy recommendations actually became national laws.
But first, here they are:
- Building codes: California’s Title 24 saves Californians $6 billion per year via higher standards for building energy efficiency.
- Vehicle fuel efficiency: The European Union’s fuel efficiency standard averages 41Â miles per gallon.
- Nationwide renewable portfolio standard: He favors a mandate that utilities be required to buy 15 to 20 percent of their energy from renewables by 2020.
- Decoupling: Already working in California, power utilities make money by helping people to save energy rather than by encouraging them to consume it.
- Charge for carbon: People should not be allowed to pollute for free.
Of course, the article enjoys the luxury of an op-ed; it does not map out how anyone will pay for any of these policies’ upfront costs. Or how long it would really take for any of these ideas to be adopted nationally.
Nonetheless, for the commercial real estate community, the fact that most of these policies are already being implemented in some form already, should mean that they can spread a bit easier than many might think.
And if a real estate investor has not prepared by adjusting their overall strategy and retrofitting their existing buildings to as good a standard as possible, more forces are very hard at work to eventually make their existing property business obsolete.
Photo credit: Flickr/Lolliepop
$100 Million Energy Efficiency & Water Conservation Loan Program for Sonoma County
The Sonoma County Board of Supervisors and Water Agency will kick off a new $100 million energy efficiency and water conservation loan program, called the “Sonoma County Energy Independence Program”.
The program is one of the early fruits of the innovative AB 811, which provide green finance via the creation of energy efficiency financing districts - something that we’re quite passionate about.
FACT: Sonoma County is the very first public body in California using AB 811 to create an energy efficiency and water conservation financing program for the entire county.
AB 811 plays a key role here (we’ve posted about it before, here and here) because it allows California counties and cities to form “contractual assessment programs” to provide loans for the installation of solar panels and other energy efficiency improvements to property owners. The loans are repaid via an assessment on the owner’s property tax bills over time — up to 20 years.
Since these loans facilitate energy reduction and with that greenhouse gas reductions across the entire jurisdiction, AB 811 is a key policy tool that cities and counties can use to comply with climate change commitments required of them.
Add to that the green jobs bonus –> they also hope that funding $100 million in loans over the next few years will translate into a big economic boost to Sonoma County’s green building industry.
Energy Efficiency Financing Districts - Pro’s & “Issues to Watch”
Pro’s
- Helps cities and counties directly reduce greenhouse gas emissions in their jurisdictions.
- Low capital, relatively “painless” way for property owners to pay for upgrades to obtain desired energy reductions and water conservation on their properties.
- Very competitive source of capital: Sonoma County, for example, may charge 400 bps over like term US Treasuries + 50 bps. A full 20 year term would result in an all-in interest rate of 7.5-8 percent, which is not bad compared to typical commercial banking rates for the similar improvements.
- Actual credit terms for property owners are easier than traditional bank debt: no credit checks or income requirements are needed to qualify for the loans.
- Green jobs bonus –> Sonoma County hopes that $100 million in loans over the next few years will translate into a big economic boost to Sonoma County’s green building industry.
Issues to Watch
- No one knows for sure what the true loan volume will be. Sonoma County and water agency officials are reporting that earlier surveys of property owners indicated a high level of interest in this program, so they are expecting brisk business.
- “Warehousing” and bond market risk: Sonoma County is funding initial loans and costs out of pocket. It is relying on the bond market to become the eventual source of capital for follow on loans. The success of their program is tied to achieving bond market at rates that are feasible given the lending rates to the property owners. The bond market has no experience with these types of loans, so their eventual pricing remains “open”. If the bond market demands much higher pricing for these loans than projected when original loans were funded (meaning that it doesn’t like these deals), that would make a bond offering unsuccessful, forcing the County to hold these loans on its own books and restricting capital meant for other obligations.
- Already overleveraged property owners can possibly get further into debt, due to the easy credit terms of these loans.
- No one knows if the total amount of these programs is really enough to achieve the required emissions reduction targets.
Despite some of the open issues, this type of program is still, in our view, quite innovative. Given the a) generally tough state of traditional finance markets, b) the need to use financial tools to reduce energy, water and greenhouse gas emissions as well as c) the easier credit terms the property owner could obtain with county and water district funds anyway — this type of green financing is not only timely but compelling.
Congratulations and good luck, Sonoma County!
Energy Efficiency Scorecard: Compare Plaques to Real Emissions Reduction
What does the number of Energy Star buildings in a market actually tell you?
Both alot and then again, not enough.
Market experts have been touting the rise in the number of Energy Star buildings in a city as a measure of the certification’s success with commercial property owners and even that market region’s relative sophistication with “going green”. A related hypotheses is that we will soon see some coastal markets reach a tipping point — where the aggregate amount of Energy Star and/or LEED-certified square footage will create an environment where brown properties trade at a discount.
Now add this question to the mix –> Who’s actually getting really good at reducing emissions coming from their building stock (which is something that landlords should be equally — if not more — focused on)? Is it the same folks who win the most plaques?
Take a look at Environmental Protection Agency’s recently published “Top 25 Energy Star Cities (click on the graphic to see an enlarged view). It’s headed by the ‘usual suspects’ like San Francisco, with strong local government support for green buildings and energy efficiency.
Look carefully and something interesting appears: several cities on the list actually achieved greater emissions reductions with fewer qualifying Energy Star buildings in 2008. So, we became curious about which cities actually created the largest reductions in emissions (measured by number of households)?
Below is our rough and ready reformatted list, which focuses on that question.
It is clear that there are many important aspects to the Energy Star data, which remain behind the scenes and are not fleshed out in the chart. Yet, the ranking changes once you start evaluating emissions reductions achieved as opposed to which cities qualified the most buildings.
For example, in the “new” ranking we created, the entire West Coast falls down to starting at place #5. Los Angeles, Energy Star’s #1 market in 2008, qualified 262 buildings with the related emissions reduction equivalent to the electricity in 35,800 homes.
Compare that to Houston, #1 on our “redone” list: it qualified just under half the buildings of Los Angeles, 145, but achieved emissions savings equivalent to electricity in 58,500 homes; 63% more homes.
Is the difference in results just a matter of bigger, more inefficient buildings in Houston getting qualified? Perhaps, but the disparity between emissions reductions suggests more than that. So many more questions are in order that plaques won’t reveal.
And that’s the main point –> Right now, many investors in the market focus on advertising the number of Energy Star or LEED-certified buildings within their portfolio. Nothing wrong there, but we do not know the actual environmental impact of their energy efficiency or sustainability programs. We do not actually know if they are committed stewards of a community’s resources or if they just cherry picked a couple of buildings in their portfolio and got them certified to improve the firm’s image with their shareholders.
We do know that some form of carbon regulation is coming and if they are not able to transparently show absolute progress on emissions reductions across their portfolios then they may be exposed to some degree of regulatory risk tied to carbon emissions.
The Energy Star data shows that energy efficiency is finally, and thankfully, being taken seriously across the country. So the Top 25 list is, in our view, appropriate for where the US real estate industry is at today — the first dawn of a long learning curve. But we can’t continue to simply reward investors who show us plaques for too much longer.
If green real estate investing is to grow and mature, we will have to move beyond ‘counting plaques’ to comparing the actual environmental progress being achieved. When you see firms reporting their certifications in the future, ask a few more questions to get the full story.
Jean’s Question: Anybody Actually Getting Carbon Credits for Green Buildings?
Gotta love the creative local church marketing campaign! Photo credit: Mykl Roventine
In any situation, you always wanna hang with the folks that ask the tough questions — they’re usually closer to the real answers. Like Green Journey reader Jean Shia, of Avant Housing, a CalPERS fund based here in San Francisco.
She asks,
“We are interested to see if anyone has been able to figure out a way to get carbon credits on their green buildings. Is there anyone pioneering this area?”
Fascinating! We were pretty sure that lots of people would be curious about this one. And a big thanks to my colleague, George Vavaroutsos, for putting in some research time, talking with a several carbon traders to get the real story on what’s happening. Here’s the deal:
You’ve Missed Nothing So Far, And Now’s the Time to Stay Alert
Turn’s out that there is limited information in the marketplace about sustainable real estate and the carbon markets. No wonder, since there are significant challenges to property owners and developers who want to receive credits for greenhouse gas (GHG) reductions. Carbon trading experts we spoke with cannot identify a single sustainable real estate project in the US that received credits for GHG reductions.
So what’s the holdup? There are a few issues:
Measuring and Verifying GHG reductions: Measuring reductions, and the ownership of these reductions, is one of the biggest challenges. Quantification is an involved and difficult task, and there is no guarantee that auditors will accept reductions. In addition to verification being prohibitively expensive, current methodologies and standards for measuring GHG reductions do not cater to real estate.
If a developer wants GHG credits for sourcing, production, and transport related GHG reductions, it may be a challenge to quantify and satisfy ownership requirements for these reductions. Additionally, the GHG reductions may not be enough to justify the cost of verification. Note: Talk directly to a third party verifier about your GHG reduction objectives. Here is a link to the California Climate Action Registry Verifiers list.
The “Additionality” Clause: Another major limitation to developers is the “additionality” clause, which requires that in order to receive GHG credits, a carbon-reducing measure would not be implemented if not for the credits that would fund such a measure.
Therefore, if you have a project that will reduce your property’s energy usage, but you will recapture your additional capital outlay with increased operating efficiency over X years and improve your ROI, then the project will not pass the additionality test, and you will not receive the credits. Yep, its pretty technical, we know.
Future Legislation: A US cap and trade system is considered likely by the carbon trading market. I posted a couple of days ago about California already forging ahead. Buyers of GHG credits will not consider many voluntary emission reduction (VER) credits, given the uncertainty created by these expectations. Experts do not expect a sustainable real estate GHG credit mechanism to develop until after a national cap and trade mechanism is implemented.
Industry Pacesetters on the Carbon Trading Front
There are several developers who are pioneering in the field of GHG reductions and credits. ProLogis and Liberty Property Trust, both REITS, are registered entities on the Chicago Climate Exchange, a voluntary cap and trade market.
Both REITS are working to create ownership over the GHG reduction credits their properties are helping to create. ProLogis leases rooftop space on some of their industrial properties in California to Southern California Edison. This renewable power helps satisfy the renewable energy credits (REC) requirements for California utility providers. This arrangement is creating GHG credits, but they are accruing to the power company, not ProLogis.
Stay tuned for more updates — as I’ve already posted, we’re expecting lots to happen on the cap-and-trade front!
