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IFC sees $200b green investment potential
Investment in green development is expected to see a significant increase in the next 10 years, thanks to regulatory support from the government and financial authorities
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span>Investment in green development is expected to see a significant increase in the next 10 years, thanks to regulatory support from the government and financial authorities.
The International Finance Corporation (IFC), a member of the World Bank that finances private-sector development, estimates that investment potential in green development will reach about US$200 billion between 2020 and 2030.
IFC principal industry specialist William Beloe said on Dec. 6 in Jakarta that the $200 billion investment potential would come from both residential and commercial property at a 3:1 ratio.
Beloe said that investment potential in green development would account for 30 percent of all green financing opportunities in Indonesia, including sectors such as renewable energy and electric vehicles, and was expected to reach $700 billion between 2019 and 2030.
According to the IFC’s report titled “Green Buildings: A Financial and Policy Blueprint for Emerging Markets”, total investment potential in green development in emerging markets was expected to reach $24.7 trillion in the next 10 years. Of this figure, about $15.7 trillion would be in residential property and the other $9 trillion in commercial property.
Speaking on the same occasion, IFC East Asia green building program lead Sandra Pranoto said that the climate investment potential in Jakarta alone was expected to reach $30 billion during the same period, more than half of which ($16 billion) would be in green building.
In addition to Jakarta, green development would also increase sharply in other cities like Bandung in West Java and Semarang in Central Java, due to local governments issuing environmentally friendly regulations.
“The local governments in Jakarta, Bandung and Semarang have at least one regulation on green building. New buildings should be designed as ‘green’ to obtain a permit,” said Sandra.
She went on to say that Jakarta currently had 100 certified green buildings, and she expressed hope that the figure would grow an average 10 percent per year.
One example of a certified green building is the Daan Mogot low-cost apartment (rusunawa) in West Jakarta, which has installed an energy-saving lighting system and low-flow faucets in kitchens and bathrooms that respectively save 32 percent in energy use and 33 percent in water use.
Sandra said that developers should calculate 0.5 to 12 percent in additional costs to invest in green development, noting that savings per month could reach up to 37 percent.
Such initiatives in green development could help Indonesia reduce potential carbon dioxide emissions by more than 1 million metric tons, which was equivalent to not driving 216,000 passenger cars for one year.
According to the IFC’s report, green buildings in Indonesia have saved up to 1.5 million megawatt hours in energy use, which has helped residents and businesses save over $120 million in energy bills.
Meanwhile, IFC chief industry specialist Prashant Kapoor said that financing green public housing would make “a lot of sense”, since low-income families needed to allocate about 20 percent of their monthly salary toward utility bills.
“The notion that green building is only for the middle and upper class is a misconception, as well as thinking that low-income families do not consume much energy,” said Kapoor, adding that green buildings would also be cheaper and more environmentally friendly compared to conventional buildings.
He added that buildings had a significant climate change impact, with housing in Indonesia currently contributing 2.4 gigatons of greenhouse gases to the global estimate of 9 gigatons.
Indonesian Banks Association (Perbanas) representative Veronika Susanti, who is also the head of OCBC NISP’s customer solution retail loan division, said Perbanas was optimistic that green buildings would comprise 10 percent of all mortgages in 2020, and aimed to reach 20 percent by 2022.
“The challenge is that a lot of people, even bankers, still do not know enough about green buildings, so we need to inform the public — especially when Bank Indonesia has issued a regulation to relax the loan-to-value [ration] for eco-houses,” said Susanti, referring to the central bank’s easing the down payment requirement for eco-friendly housing and vehicles.
Such regulations were expected to further encourage the development of green buildings in Indonesia.
