Sustainability Financing What is It and How Can You Benefit from it?

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Sustainability Financing What is It and How Can
You Benefit from it?
The Australian Government is requesting feedback
on the proposed Sustainable Finance Strategy,
and for this, the Commonwealth Treasury issued a
"Sustainable Finance Strategy" consultation
paper on 2 November 2023. Australian Government
has already released many standards and schemes
such as NatHERS, BASIX, NABERS, and more to
build energy-efficient buildings in the
country. The proposed Sustainable Finance
Strategy further outlines the potential
regulatory changes that could affect all
Australian investment markets to help the country
achieve the net zero goal. The consultation
period for seeking feedback on this strategy will
end on 1 December 2023. After seeking
stakeholder feedback, the Government plans to
introduce a roadmap to implement the Sustainable
Finance Strategy and implement it in 2024. This
article covers sustainable finance strategy, its
benefits, and the reforms required to implement
it in Australia.
What is the Sustainable Finance Strategy?
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• Sustainable finance for real estate is the use of
  financial instruments to finance or refinance
  builsing development projects that have a
  positive environmental or social impact. This can
  include projects that
• Reduce greenhouse gas emissions
• Improve energy efficiency
• Conserve water
• Create affordable housing
• Revitalise neighbourhoods
• These sustainability targets can be achieved
  through the NatHERS Assessment, BASIX
  certificate, NABERS rating, etc.

What are the Benefits of Sustainable Financing?

• Sustainable finance for green projects can offer
  a plethora of benefits to Australian real estate
  developers, encompassing both tangible and
  intangible advantages.
• These benefits can be categorised into three main
  areas financial, environmental, and
  reputational.
• Financial Benefits
• Access to Capital Sustainable finance
  instruments, such as green bonds and
  sustainability-linked loans, provide developers
  with access to a growing pool of capital
  specifically earmarked for environmentally
  friendly projects. This can open up new
  financing opportunities and lower the cost of
  capital when you attach BASIX, NABERS or NatHERS
  certification.
• Improved Risk Management Sustainable projects
  often have a lower risk profile due to their
  resilience against climate change impacts and
  growing demand for environmentally conscious
  buildings. This can lead to reduced insurance
  costs and enhanced investor confidence.
• Enhanced Property Values Green buildings tend to
  command higher rental rates and resale values
  compared to traditional buildings. This is driven
  by tenant preferences for energy-efficient and
  environmentally responsible NatHERS or
  NABERS-certified spaces.
• Environmental Benefits
• Reduced Environmental Footprint Sustainable
  projects are designed to minimise their
  environmental impact, leading to lower greenhouse
  gas emissions, water consumption, and waste
  generation. This contributes to Australia's
  overall sustainability goals and reduces the
  industry's environmental footprint.

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• Improved Resource Efficiency Green buildings
  incorporate energy-efficient technologies, water
  conservation measures, and sustainable materials,
  leading to lower operating costs and resource
  utilisation. This translates into long-term
  savings for developers and tenants.
• Enhanced Livability and Well-being Sustainable
  buildings such as NatHERS-certified buildings
  promote occupant well-being by providing a
  healthier, more comfortable, and environmentally
  friendly living environment. This can attract
  tenants and enhance the overall appeal of the
  property.
• Reputational Benefits
• Enhanced Brand Image Embracing sustainable
  practices can significantly improve a
  developer's brand reputation, positioning them as
  a leader in environmental responsibility and
  social consciousness. This can attract investors,
  tenants, and partners who share similar values.
• Competitive Advantage In an increasingly
  ecologically conscious market, sustainability
  credentials can give developers a competitive
  edge, differentiating them from their peers and
  attracting environmentally conscious buyers and
  tenants.
• Social License to Operate Demonstrating
  commitment to sustainability through NatHERS
  assessment can enhance a developer's social
  license to operate, fostering positive
  relationships with communities and stakeholders,
  leading to smoother project approvals and
  reduced social risks.

What are the examples of sustainable finance for
real estate in Australia?
There are a number of examples of sustainable
finance being used for real estate projects in
Australia. These include Green bonds Green
bonds are a type of bond that is used to finance
building projects that have a positive
environmental impact. Australia was one of the
first countries in the world to issue a green
bond, and the country has since become a major
player in the green bond market. Sustainability-l
inked loans (SLLs) SLLs are a type of loan where
the interest rate is linked to the borrower's
sustainability performance. This incentivises
borrowers to improve their sustainability
performance. Energy efficiency loans Energy
efficiency loans are a type of loan that is used
to finance projects that improve the energy
efficiency of buildings. This can include a
NatHERS Certificate.
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Concluding Words
Sustainable financing is vital in promoting the
transition to a carbon-neutral and sustainable
society. Supporting developers prioritising
resource efficiency and healthy ecosystems and
promoting the circular economy will help reduce
waste generation, promote recycling and reuse,
and protect the ecosystem. In addition to
sustainable financing, you can also obtain the
NatHERS Certificate to indicate the energy
efficiency score and performance of your
building. Adopting these approaches can make
Australia a sustainable and environmentally
friendly country.
Contact Us
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