Retrofitting and financing
The Municipality of Melbourne sat down and took a long hard look at the situation. On the one hand, their goal of zero net emissions by 2020, on the other, the fact that 53% of emissions in the municipality come from commercial buildings.
The municipality decided to target the two-thirds of non-residential buildings in the municipality with the greatest potential – these are the buildings in Melbourne’s 1200 Buildings program. Melbourne therefore set up a special independent trust to assist in funding environmental upgrades and retrofits for commercial buildings, and the municipality began to levy an environmental upgrade charge. The fund currently comprises AUS 6.4 million.
Shared costs – shared benefits
The fund makes it possible for both owners and tenants to share the costs and benefits of retrofitting buildings. Owners are not always motivated to invest in retrofitting because it is the tenant who benefits from the lower energy consumption and utility bills that result from retrofits.
How the Sustainable Melbourne Fund works
The owner applies for funding for environmental improvements, which are assessed for energy and water savings, as well as carbon emission reductions. The owner secures funding from a financial institution for the improvements. This is, however, made easier as the City of Melbourne then declares an environmental upgrade charge on the building. So while the financier advances the costs, they are sure of their collateral, as the payments of the charge are collected through the usual city rates system, before being forwarded to the financier by the city. This makes funding easier.
Greener buildings are better investments
An upgraded building is also a better investment for the owner. Figures from the IPD (Investment Property Databank) Green Property Index show that buildings with higher environmental ratings are both less expensive to operate and appreciate more in value. Buildings with Green Star ratings have performed significantly better and maintained stability in capital values during the financial crisis. Upgraded buildings simply have an enhanced appeal to tenants and buyers.
For the tenants of the building there is the obvious advantage of working in a better building. In addition, utility bills, which are paid by the tenant, will be lower in a retrofitted building. So while the tenant pays a charge, they also save money on their bills.
The fund also benefits the city itself. Retrofitting drives investment in local communities, and the people carrying out the retrofitting work are local, so it provides jobs and also helps build upon existing skills. Finally, it allows the municipality to make use of its expertise in the areas of energy efficiency, renewable energy and project management and delivery, for the benefit of a better Melbourne.