Buildings require billions more in capital investment to reach climate targets

Buildings require billions more in capital investment to reach climate targets

– Climate targets across the world are accelerating the implementation of smart, decarbonized, energy-efficient buildings.

– In order to meet climate change commitments however, building stock requires significantly higher investment – around 3 times the current rate.

– Smart financing can enable greater rates of investment in a financially sustainable way.

– New research from Siemens Financial Services (SFS) estimates the ‘investment gap’ between current investment levels in energy efficient renovation of buildings stock, and those needed to achieve decarbonization targets in 4 regions across 3 sectors.

Siemens Financial Services (SFS) has released a new insight study entitled “Financing Decarbonization: Smart Buildings” which estimates the ‘investment gap’ between current levels of investment in renovating the office, hospital, and education estate and the actual level needed to meet accelerated decarbonization targets by 2050.

Part of a series on financing decarbonization, the research focuses on buildings – which account for 36% of final energy use – as a prime target for energy efficiency initiatives, and a major potential contributor to climate target attainment.

The ‘gap’ represents a substantial shortcoming in each of the 4 countries studied, specifically: USA ($5.3bn for offices, $1bn for hospitals, $3.8bn for education) China ($12.7bn, $2.7bn, and $10.8bn respectively) India ($0.9bn, $0.6bn, and $6.2bn respectively), and Europe ($7.8bn, $2.2bn, and $5.5bn respectively).

Buildings require billions more in capital investment to reach climate targets

The research finds that smart buildings – which incorporate hot-desking, health and safety, information access controls, security, infection mitigation, and much more – are best suited to ensure more efficient use of commercial and public buildings, significantly reduced energy usage and emissions, and the transformation of buildings into far more sustainable assets for society.

In order to bridge the gap between current investment levels and the required volumes, smart financing methods are being offered by private sector finance.  These solutions seek to make the conversion to decarbonized, energy-efficient, smart buildings affordable for owners. Financing tools can ease cash flow and align costs to the rate of benefits gained. Smart financing also has the potential to make the transition to decarbonization budget neutral, by harnessing future savings to pay for current investment.

“Our use of buildings has been disrupted and altered by the pandemic,” says Jo Harris, Sales Director, Commercial Finance UK, Siemens Financial Services. “Not only can smarter building stock better cope with this change, it will contribute significantly to a cleaner and greener future. Smart financing solutions can accelerate the rate of transformation, helping buildings owners to achieve net-zero carbon building stock by 2050.

Methodology

Proprietary data from Siemens Financial Services on cost of energy efficiency renovation per m2 (existing buildings) was applied to total m2 of the hospital, office and education estate for each country/region studied. The total cost of energy efficiency renovation was calculated based on the Global Alliance for Building and Construction’s estimate of the % of building stock that would have to be converted by 2040 to meet current climate targets (rising to 2% by 2030 and 3% by 2040). Then, the cumulative % of actual current renovation rates (approx. 1% of existing building stock) was projected to 2040 and the cost of renovation calculated at those current rates. The Investment Gap is the difference between current energy efficiency renovation rates and the projected rate of renovation needed to meet climate targets.

For further information, please see: www.siemens.com/financing-decarbonization-smart-buildings

For further information on SFS, please see www.siemens.com/finance

Buildings require billions more in capital investment to reach climate targets
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Buildings require billions more in capital investment to reach climate targets
BDC September 2022 issue - 296

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