New Financial Strategies for Sustainable Buildings

Practical Guidance for Built Environment Professionals

Stephen Finnegan

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781317191186
• Edition: 1
• Topic: Architektur
• Subtopic: Berufspraxis in der Architektur

Built environment professionals considering whether to embark on the design and construction or retrofit of a fully 'sustainable' or 'green' build need to know the financial implications of their decisions. What are their financial options? What are the risks? This book offers practical guidance on how sustainable building projects are financed, designed and built. All too often sustainable building is undertaken without proper consideration of the true lifecycle cost, risk and financial impact. This book will take the reader on a journey from initial sustainable design through to final completion highlighting the finance options available to them.

New Financial Strategies for Sustainable Buildings provides key guidance to a variety of professionals, including architects, designers, contractors, construction managers, investors and other interested parties, whilst providing a useful reference to students on architecture, construction management and real estate/surveying courses who need to know about finance, construction economics, and sustainable development projects.

1
Financing sustainable buildings

It is recognised that buildings and their operation contribute to a large percentage of total energy end-use worldwide. Buildings account for one-third of global greenhouse gases with commercial and residential buildings alone accounting for 40 per cent of the world’s energy consumption, RICS (2015), UNEP (2007). The vast majority of energy is consumed by existing buildings while the replacement rate of existing buildings by new-build is only around 1 to 3 per cent per annum, Barlow and Fiala (2007), Roberts (2008).

Clearly then there is a need for more sustainable buildings if we are to meet our global carbon reduction targets and indeed one should start by assessing the existing stock of buildings. But what is a sustainable building? If a commercial building is fitted with solar photvoltaic (PV) panels or a green roof, does it become a sustainable building? Many use rating systems to explain what a sustainable building is i.e. the US Leadership in Energy and Environmental Design, LEED (2016), the UK Building Research Establishment Environmental Assessment Method, BREEAM (2016), the Australian Green Star Programme, GBCA (2016), the Japanese Comprehensive Assessment System for Built Environment Efficiency, CASBEE (2016) or the Canadian Green Globes (2016). Others refer to the energy use in the building, the triple bottom line ‘social, environmental and financial’, operational and embodied carbon or the ‘brundtland statement’.

Sustainable development is the kind of development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

UN Bruntland Report 1987

The Australian Sustainable Built Environment Council (ASBEC) has created a table that explains the terminology and provides a definition by region of what is meant by a sustainable building, see Appendix 1. In this book the exact definition or building type is not important, but what is important is that all ‘sustainable buildings’, whether they be zero carbon, nearly zero energy, net zero or carbon neutral, can be produced in a cost-effective manner. The preconceived view of many is that this is simply not true and it is generally too costly to produce a new sustainable building or retrofit an existing building to become more sustainable. The World Green Building Council (2013) examined the business case for green buildings by looked at hundreds of examples. In two particular areas (design and construction and operating cost) they concluded the following:

Design and construction costs – Research shows that building green does not necessarily need to cost more, particularly when cost strategies, program management and environmental strategies are integrated into the development process right from the start. While there can be additional costs associated with building green as compared to a conventional building, the cost premium is typically not as high as is perceived by the development industry.

Operating costs – Green buildings have been shown to save money through reduced energy and water use and lower long-term operations and maintenance costs. Energy savings in green buildings typically exceed any design and construction cost premiums within a reasonable payback period. In order to achieve their predicted performance, high-performing green buildings need to be backed up by robust commissioning, effective management, and collaboration between owners and occupiers.

The element of perception is key in what is now referred to as the ‘perception gap’ – the estimated vs. actual cost premiums for green buildings. The actual cost premium of a green building over a conventional building, based on the numerous studies referenced in the World Green Building Council report is −0.4 to 12.5 per cent. The perceived cost is 0.9 to 29 per cent.

This book supports the claims made by the World Green Building Council in that financing both existing and new sustainable buildings is not a costly venture as a number of new financial strategies now exist. In the modern built environment there are vast opportunities to create sustainable cost-effective buildings and if the client and project team are willing to consider the alternatives and embrace change then this can be achieved. Those individuals, who take the time to understanding the processes, learn from successful case studies and take calculated risks, are finding that sustainable buildings pay. Edwards and Naboni (2013) found that in the United States and Europe researchers have now discovered that buildings based on more ecological approaches, i.e. green sustainable buildings led to a social and economic benefit for the developer.

It is widely acknowledged that the fear of higher investment costs, in comparison to a conventional building, is the main barrier to the production of new sustainable building, Häkkinen and Belloni (2011), Hydes and Creech (2000); Larsson and Clark (2000); Nelms, Russel, and Lence (2005). Before one can understand how sustainable buildings can be financed, it is first of all necessary to understand how they are built and what they are. The starting point is to appreciate the modern roles of built environment professionals.

The modern role of the built environment professional

Built environment professionals are involved in each stage of the life of a building, from concept design through to construction, operation and final disposal or reuse. Typically, there are two main types of construction, each with different contractual arrangements. It is very important to understand these types of arrangements as they form the basis upon which all buildings are constructed. As a result, when a sustainable building (with a new financial strategy) is considered, a new arrangement with a contractor and/or consultant is necessary – this is discussed in later chapters. This is the first ‘sticking point’ when considering sustainable buildings, as it requires a change to the conventional approach.

The two main types of construction are as follows:

1. Design Bid Build – whereby the client would appoint consultants to design the project and prepare tenders. Contractors then competitively tender for the work and then have responsibility for the project and;
2. Design and Build – whereby one entity works under a single contract. Typically, the contractor is appointed directly to design and construct the works.

With both construction types there is a need for specialist services that will bring the relative parties together to create the building. This would include for example:

• The geotechnical engineer who would examine and explore the site for ground conditions and determine the design for foundations and earthworks.
• A land surveyor who would then determine boundaries and relative positions for construction.
• The architect who creates the vision and ensures that contractors follow their design and plan of work; use the correct materials and ensure quality management.
• The structural engineer who would ensure that structural calculations are correct, that the building will remain upright and that all loads and forces are strong enough to avoid collapse.
• The quantity surveyor, who is concerned with the value of construction works is involved from early design and in production of the essential bill of quantities.
• The building services engineer who would interact with the teams to ensure services are correctly sized and installed to their specification. They would also handle Mechanical and Electrical (M&E) works, design layouts and ensure safety of systems.

Finally, a mixture of construction, facility and project managers, surveyors and engineers are involved at various stages in the planning, construction and operation of the premises. All of which have a major role to play in influencing and implementing change. When considering how to finance a sustainable building it is therefore important to understand how a new strategy could impact on each of these individual parties and what are the constraints.

Considerations and constraints

Each built environment professional should, as part of their role, consider their involvement in the production of a sustainable building. Clearly there needs to be an overarching commitment from the client and contracting body to achieve this goal. In most modern sustainable buildings this commitment is in place from the outset and the next key step is to actively involve all participants. There is no requirement for each professional to have expert knowledge and in-depth experience of the entire process; however, each should understand and appreciate their role in providing advice and their constraints in making decisions that will impact on the overall production of a sustainable building. The key questions are: what role should each person play? what constraints will they face? and what should they as individuals be doing? This is clearly a complex and difficult set of questions to answer; nonetheless some guidelines are presented in Table 1.1.

These guidelines may work well in principle but what about the practicalities? How do the professionals work in collaboration? How do we successfully integrate the teams? Before we can answer these questions, we need to understand the principles and practicalities.

1.1 Sustainable building design and finance in principle

Ask any built environment professional about the financial implications of a sustainable building and you will likely get the same response ‘It is too costly and too risky’. In the modern day, this statement is wholly unjustified and as discussed earlier is a perceived risk. Edwards and Naboni (2013) state that buildings based on more ecological approaches lead to social and economic benefits for the developer. In more detail these benefits are grouped under four headings:

1. better lifecycle costing;
2. improved productivity or performance in functional terms;
3. better social relationships at a building and community level;
4. enhanced image for the building and the organisation responsible for its inception.

All of which may well be true but when a developer is faced wit...