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Lack of quality data on energy-efficiency performance is holding back the proliferation of green building financing products in mainland China, analysts said.
This is despite various levels of government establishing green building standards, setting targets and offering subsidies to support the sector.
A five-year plan unveiled by the Ministry of Housing and Urban-Rural Development in March, for example, aims for the full implementation of green building standards in all new residential and public buildings by 2025.
It also set national targets for the renovation of existing buildings to improve their energy efficiency, and the installation of solar and geothermal energy facilities. The policies form part of the government’s plans for peaking carbon emissions by 2030.
The weak spot lies in implementation. “The definition has not been very clear when it comes to green buildings,” Jia Jingwei, associate director of ESG research at Sustainable Fitch, said on the sidelines of the rating firm’s ESG conference last week. “A lot of them have certificates but they were certified on design – but not on operations.”
The enhancement of regulations by the ministry would help improve the quality of green building certification and reduce the risk of greenwashing, she said. Greenwashing refers to sustainability benefit claims made without clear, agreed definitions of sustainable investment, which could sometimes lead to a false impression of overall benefits.
About 94 per cent of certified green buildings in China were labelled only for design, while only 6 per cent were confirmed to be operationally green, Jia said in a report in September, citing research by the China Association of Circular Economy. “While the number of green buildings is increasing rapidly, doubts about their green credentials have been raised,” she said in the report.
Even governments in some southern Guangdong cities that have subsidy programmes for green buildings have had difficulty ascertaining their environmental benefits and were slow to give out financial rewards, according to a report published last month by Civic Exchange and the Greater Bay Area Green Finance Alliance.
The alliance recommended that the China Green Building Label and the international Excellence in Design for Greater Efficiencies standards be recognised by Beijing to attract international investment.
Lack of verification through post-construction monitoring of buildings’ energy savings was to be blamed. “Due to difficulties in verifying whether green buildings that had achieved design targets still met requirements during actual operations meant subsidies were rarely actually disbursed,” the report said.
It is also difficult for investors to build in energy-saving and carbon-emission-reduction benefits in any offers they would make to buy such buildings, it added.
Most Chinese banks – except a few small local ones – have yet to incorporate residential buildings’ green features in their mortgage lending decisions due to the absence of vigorous certification standards, Jia said last week.
This is despite the potential for banks boosting their green finance activities being huge, since home loans account for nearly a fifth of their overall lending.
While mainland financial institutions have shown a growing interest in issuing mortgage-backed securities for green buildings, such issuances have been limited to commercial ones so far, Jia said.
Three carbon neutral-certified green commercial building mortgage-backed securities issuances totalling 17.6 billion yuan (US$2.4 billion) were recorded in this year’s first half, she said, adding that some of the buildings had received both domestic and international certifications.
Mortgage-backed securities are securities backed by a collection of property mortgages. They are typically sold to investors seeking regular income from cash flow derived from mortgage repayments.
To address demand for quality data, in August, certification provider TUV Rheinland China and the China chapter of UK-based non-profit organisation Building Research Establishment (BRE) launched a net-zero carbon building certification scheme.
TUV, BRE and the UK-based carbon reduction verification body The Carbon Trust are among nine cross-industry organisations that have launched a joint initiative to develop the UK’s first net-zero carbon buildings standard.
“Through such discussions, we can develop more consensus-based and broader standards,” Rakesh Vazirani, TUV’s global head of sustainability assurance, told the Post last month at the ReThink HK conference in Hong Kong.
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