IFC's Efforts to Spur Sustainable Building in Mexico
STORY INLINE POST
Q: What are the primary objectives of the sustainable construction division of International Finance Corporation (IFC) in Mexico?
A: The objective is to support local programs that streamline a market transformation in sustainable construction following four pillars. The first pillar is to work with banks to promote investment in sustainable buildings in Mexico. We have done similar work in Colombia with Bancolombia to develop a credit line for green builders and green mortgages and we expect something similar to happen in Mexico. The second pillar is investment and consultancy services for the local real estate sector using funds from IFC or from private entities. We have supported some local builders to develop sustainable projects through green loans, including a US$20 million loan to real estate developer Vinte. This helped to support the construction of 2,000 green homes, in addition of the 4,000 housing units that this developer already have certified. We have also worked with Finsa in the industrial park segment.
The third pillar is to work with local governments to promote sustainable building practices in the private sector, not just though the generation of regulations but also through the creation of incentives. For instance, IFC helped the development of sustainable regulation in Peru alongside its federal government. The fourth pillar is IFC’s voluntary certification program created four years ago under the name Excellence in Design for Greater Efficiencies (EDGE), which is an accessible certification that requires only a small investment. To acquire it, developers must use 20 percent less water, utilities and construction materials in comparison to a baseline calculated for every different city. The results are audited by a third party to ensure compliance. To this date, over 600,000m2 and over 25 projects in Mexico have this certification.
Q: How are you guiding local real estate developers to gain the EDGE certification?
A: We promote certification among real estate developers. For instance, we have strategic alliances with the Association of Real Estate Developers (ADI) and with SUMe, a not-for-profit organization with many years of experience promoting excellence in construction and sustainable practices. We also work with the most important certifiers in the world, including GBCI, which is a global organization that provides the LEED certification, and SGS, a Swiss verification, testing and certification service provider in alliance with Sintali. Those interested in gaining the EDGE certification can use the free EDGE platform to model the project and use its calculator to make a cost-benefit analysis of every measure they plan to implement. When developers think of sustainable projects, they often think of the most expensive equipment, such as photovoltaic cells, but there are many other less expensive alternatives that they can use. One example is passive design, which involves the implementation of a series of architecture techniques that require little investment as they use natural light, cross ventilation and other techniques that take advantage of natural resources to increase the building’s energy efficiency. Through the EDGE certification, we want to increase awareness among developers that incorporating sustainable practices is neither expensive nor time consuming but accessible to almost any developer.
Q: How would you describe demand for green buildings and how do you expect it to evolve considering the challenges the country is facing?
A: Today, having a green certification results in added value for investors and buyers not just for office and residential buildings, but also for many other types of construction. For instance, recently we certified one of IMSS’ COVID-19 hospitals in Puebla, proving that even during hard times when many are mainly concerned with fighting the health emergency, it is possible to construct and certify green buildings. Moreover, the new normal will require us to stay home for longer periods, which will make it increasingly important to achieve thermal control at houses and use less electricity and other utilities. Sustainable homes have smaller utility bills, bringing savings to buyers and leaving them in a better position to pay other bills, including their mortgage. Furthermore, there is an increasing international interest in the development of sustainable architecture from private funds.
Q: What impact will the current economic situation have on investment in green buildings?
A: The outbreak has hit the residential and residential-plus segments but opportunities still abound. We are seeing EDGE-certified projects everywhere, from social housing to residential-plus, as there is still significant demand for housing developments. There is also a significant area of opportunity in the reconstruction segment and developers are turning older buildings green as they are increasingly aware of the importance of sustainable construction. Builders are also increasingly interested in obtaining green certifications.
Q: How important are green certifications when attracting foreign capital for real estate?
A: Many companies are already requesting green certifications before investing in a building. For instance, investors in industrial parks commonly request the use of sustainable construction practices and the development of green buildings as this will translate to smaller costs for developers and for lessors. For instance, the Paladin Realty investment fund, a US fund that invests in Latin America, requires the EDGE certification from its collaborators. Recently, HSBC also required developers of a furniture store in Ramos Arizpe, Coahuila, to acquire a green certification. These certifications guarantee customers that the building is truly green. We estimate that a manufacturing plant using sustainable construction practices will see a return on investment in two years. A hotel, however, will see it in less than that.
Q: Who have been your allies in implementing green construction practices in Mexico?
A: The federal government has made great advances in regulations concerning sustainable construction practices and green certifications. The government has also developed programs to promote these practices through the use of development banks. An iconic example is Ecocasa, a federal program that provides leasing for the construction of sustainable housing, which has generated a differentiated financial product for real estate developers. The program integrates new sustainability criteria, including the use of passive bioclimatic design that takes advantage of location, ventilation and natural light to generate green residential buildings. The Institute for the Workers’ National Housing Fund (INFONAVIT) has also made substantial progress in promoting the use of sustainable practices in the construction of new houses through the Green Mortgage Program. The National Commission of Use and Energy Efficiency (CONUEE) has also worked for many years on the development of regulations that promote sustainable construction. These and many other federal institutions are working tirelessly to develop regulation and promote sustainable construction practices.
Q: What should the real estate sector expect regarding the use of sustainable building practices?
A: Local regulations are following those of other countries. In some European countries, new houses cannot be sold without first obtaining a report on their energy efficiency. Regulations regarding green buildings will only become stricter over time as new buildings are expected to last for 30 years or more. Moreover, the private sector, led by banks, is spearheading investment in green projects, which will spur a rapid expansion of the market. In Colombia, once the first bank developed an investment mortgage, many others followed suit. We expect a similar situation in Mexico.
International Finance Corporation is the private investment arm of the World Bank. Mexico Green Building is one of its areas of activity, which focuses on sustainable building development