Investment in efficiency building renovation needs to triple

Billions of dollars are needed to bridge the gap between current investment levels in energy efficient renovation of buildings and those needed to achieve decarbonisation, according to a new study.

Part of a series on financing decarbonisation, the research from Siemens Financial Services (SFS) estimates that to meet climate change commitments, building stock requires significantly higher investment – around three times the current rate.

Download the report: “Financing Decarbonization: Smart Buildings”

The study looks at decarbonisation targets across the office, hospital and education estates in four regions as prime targets for energy efficiency initiatives. The investment gap represents a substantial shortcoming in each of the four countries studied, specifically: USA ($5.3bn for offices, $1bn for hospitals, $3.8bn for education) China ($12.7bn, $2.7bn, and $10.8bn respectively) India ($0.9bn, $0.6bn, and $6.2bn respectively), and Europe ($7.8bn, $2.2bn, and $5.5bn respectively).

In Europe, roughly 75% of the building stock is considered energy inefficient. The report says renovating existing buildings could reduce the EU’s total energy consumption by 5-6% and lower carbon dioxide emissions by about 5%. Yet, on average, less than 1% of the national building stock is renovated each year.

A statement from the Global Alliance for Building and construction said: “The pace of renovation in all countries concerned is insufficient, staying well behind potential. Annual renovation needs to rise in industrialised countries to an average of 2% of existing stock per year by 2025, and 3% by 2040.”

Seimens’ research finds that smart buildings – which incorporate hot-desking, health and safety, information access controls, security, infection mitigation, and much more – are best suited to ensure more efficient use of commercial and public buildings, significantly reduced energy usage and emissions, and the transformation of buildings into far more sustainable assets for society.

In order to bridge the gap between current investment levels and the required volumes, smart financing methods are being offered by private sector finance. These solutions are designed to make the conversion to decarbonised, energy-efficient, smart buildings affordable for owners.

Financing tools can ease cash flow and align costs to the rate of benefits gained. Smart financing also has the potential to make the transition to decarbonization budget neutral, by harnessing future savings to pay for current investment.

“Our use of buildings has been disrupted and altered by the pandemic,” says Jo Harris, Sales Director, Commercial Finance UK, Siemens Financial Services. “Not only can smarter building stock better cope with this change, it will contribute significantly to a cleaner and greener future. Smart financing solutions can accelerate the rate of transformation, helping buildings owners to achieve net-zero carbon building stock by 2050.”