In tandem with the taxonomy and increased sustainability focus, there is also a growing interest in green finance. Banks and financial institutions are now directing a greater part of their capital towards sustainable projects. Together with DNB, we have created an overview of how you can get green financing for your buildings based on BREEAM, other certification or the taxonomy.
Green buildings, which meet stringent environmental standards, not only offer lower operating and upgrade costs, but also attract tenants and investors who may be willing to pay more for buildings with sustainable qualities. This can lead to a higher market value compared to less sustainable properties and would most often represent a lower risk for both the farm owner and the bank, all else being equal. The projects thus become attractive investment objects, they have lower risks and provide higher potential returns. In addition, green financing will allow for better financing conditions.
Green loans are offered to projects that promote sustainable development and have specific green qualities, provided that other conditions for financing are in place and that the necessary documentation on sustainable qualities is in place. In total, DNB plans to finance and facilitate financing of up to NOK 1,500 billion for sustainable activities until 2030. These loans offer better conditions than traditional loans and in real estate they include both new buildings, existing buildings, rehabilitations and individual measures within energy efficiency of existing buildings.
DNB has provided green loans for several projects. Examples include green construction loan to a commercial building, green rehabilitation loan to commercial buildings and green rehabilitation loan to a condominium.
At DNB, the criterion for a green loan for a new commercial building is that the building achieves BREEAM NOR certified to grade Excellent. For residential construction projects or for existing commercial buildings with a Commissioning Permit (IG) before 2021, BREEAM NOR Very Good, alternatively SVANE-branded buildings, are sufficient. In addition, the building or project must have a minimum energy class B. These criteria ensure that buildings not only meet but exceed current environmental standards.
An alternative is a green loan for the total rehabilitation of buildings where DNB requires at least a 30% reduction in expected energy use after rehabilitation. This is in line with the criterion of taxonomy. It has also facilitated green loans for individual measures such as insulation, replacement of windows and installation of solar cells.
For sustainability-linked loans, it is the improvement of selected KPIs that apply, where the objectives should be ambitious. KPIs can be, for example, the number of certified buildings in a portfolio per year or annual reduction in energy use and reduction in CO2. Then a margin discount may be offered on the loans connected to such a deal. If none of the objectives is achieved, there is, on the contrary, a margin markup, so these agreements have a symmetry in them.
In DNB's latest version of framework for green products one can also receive a green loan based on the significant contribution criteria of the taxonomy's environmental objective 1. In practice, this means that an existing building with IG before 2021 can receive a green loan on the basis of energy class B. For buildings larger than 5,000 sqm, an EOS system must also be installed and put into operation. For newer buildings, there are stricter requirements for energy efficiency, as the building must be 10% more energy efficient than a zero energy building as the thresholds are defined by the Norwegian authorities. For buildings larger than 5,000 sqm, there must also be a CO2 accounting for the life cycle of the building and the measurement of thermography and the density of the building have been carried out.
An overview of the criteria for green loan is summarized at this page. More detailed explanation of the criteria can be found here.
Investing in green buildings and achieving BREEAM certification or other proven environmental measures not only strengthens the building's market value but also contributes to the environment by reducing its climate footprint. By taking advantage of green financing opportunities, building owners and developers can benefit from better loan terms while contributing to the green shift.
This focus on green finance is a win-win for both financial institutions and property developers, as it leads to more sustainable development while providing financial incentives.
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