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Green Buildings in Africa – Financing the affordability

Africa stands out disproportionately as the one of the most vulnerable regions of the world in the face of climate change. Africa’s contribution to climate change is merely 2-3% but the geographical location of the region coupled with low socio-economic growth makes it more susceptible to damages, as compared to the rest of the world. A lack of resources to build resilience towards climate change has further aggravated the situation. The frequency of natural disasters has increased threefold in last 30 years, which are forcing people out of their homes, exacerbating poverty. People in poorer African countries are at least four times more likely to be displaced by extreme weather than people in richer countries. This necessitates drawing greater attention towards building affordable structures that can withstand the effects of natural disasters.

The construction industry alone accounts for 38% of the total global CO2 emissions globally, the largest impact of which is visible in the African continent. According to a report published in the journal PLOS ONE, eight African countries are among the 10 most vulnerable to climate change. The buildings sector’s emission increase is due to the continued use of coal, oil and natural gas for heating and cooking combined with higher activity levels in regions where access to electricity is limited or remains carbon-intensive. Mainstreaming green buildings which are resilient in the face of climate change can not only reduce the carbon footprint of the built environment, but also help reduce the impact of climate change related natural disasters.

One of the biggest challenges in mainstreaming green buildings is widespread poverty and general lack of financial knowledge in African continent. The continent’s low adaptive capacity further adds fuel to the fire. It is also generally believed that there is an apparent trade-off between sustainability and affordability. This, however, is not the case. In fact, the IFC report on green buildings dispels several myths around that and emphasizes on the fact that in the long run, it is more affordable to build green. The report found that people who live and work in green buildings have lower utility bills and improved resource efficiency. Green buildings use on average between 20-40% less energy and water than traditional buildings, and the users can save 15-20% on their utility bills.

Case studies to demonstrate how green building projects have been financed in Africa to increase their affordability  

IFC’s four-part strategy further tries to address the issue of affordability on a larger scale to support green building growth. From advising on activating financing through the banking system and supporting product development such as green mortgages and green bonds to coding green building laws and incentives, IFC has taken it one step forward.

The strategy can be understood by the example of South Africa where IFC saw an opportunity to open the markets for residential green buildings. The challenge, however, was that developers were not able to pass down the extra costs of greening to the homeowners. The project was being funded by the US $300 million IHS Fund which mainly caters to low-income affordable housing projects. To tackle this problem, IFC set up a US $10 million concessional equity fund from the Global Environment Fund which covered the incremental costs of greening. Also, a capacity building program was also initiated within IHS on applying the EDGE certification standard. This clearly indicates the importance of mainstreaming the green buildings and at the same time focuses on the need of innovative financing solutions to bring affordability.

Another example of innovative financing solution is Kenya’s first green bond which was issued in 2019. The bond managed to raise more than US $40 million to build environment friendly affordable accommodation for students. They aim to provide several thousand rental housing units for students and young people in general. All the buildings meet the requirements of Low Carbon Buildings (Residential) Criteria by Climate Bonds Initiative. These residential developments are spread across 6 locations in Nairobi. This shows that the issue of affordability in the housing sector can be addressed by positioning green buildings as an instrument of community building.

According to an example in Nigeria, Echostone, an international affordable housing solutions provider, is developing 100,000 affordable homes over 5 years through a PPP (public-private partnership) with the local government, which offset the cost of land. The pilot project completed in 2020 offers 252 houses in Peridot Parkland Estate. These homes demonstrated 53% energy savings, 42% water savings, and 35% reduction in embodied energy in materials, further reducing the costs of utilities. The example puts emphasis on the involvement of private stakeholders in the financing models thus expediting the process and reaping the most out of it.

After studying the above examples, it can be concluded that the green buildings path towards affordable sustainability might seem rocky at first, but with the use of right financing instruments, African countries with less than adequate economic resources can rely on them to build an affordable solution, resilient in the face of climate change.

Other examples in Africa: