Janet Hamer, Federal Reserve Bank of Atlanta Jacksonville Branch, Community AffairsSeptember 22, 2009

The comments in this presentation are those of the presenter alone and do not necessarily reflect the views of the Federal Reserve Bank of Atlanta or the Federal Reserve System.

Green for Green:financing for green buildings

Why green, according to New Ecology

Average construction cost: $181/SF

Greening cost: $2-6/SF

Percentage increase for greening: 1.1%-3.3%

Green financing, defined

A system of public and private sector financing mechanisms that promote sustainable development

Green v. traditional financing Traditional

Short to midterm financial outcomes

First costs focus Income & expenses NPV, ROI, IRR, NOI

Green Socially/

environmental expectations

Life cycle cost analysis

Income & expenses NPV, ROI, IRR, NOI Savings

What are lenders doing?

Commercial: Underwriting that accounts of improved NOI,

green-trained staff, encouraging greening Retail:

Green mortgages, reduced closing costs, climate-themed credit cards, car loans with reduced rates for environmentally friendly cars

Operations: Paperless checking, headquarters and

branch greening, employee education

What are appraisers doing?

The components, benchmarking and ratings

Focus on:Energy useWater consumptionWaste

Components, benchmarking and rating systems

Rating systems: In-house systems Third-party systems▪ LEED▪ NAHB▪ Earthcraft▪ Energy Star (recently expanded to

multifamily)▪ Florida Green Building Coalition▪ Many others

Components, underwriting

Green cash flows Energy cost savings (operating) Water cost savings (operating) Faster absorption (if you can prove

market demand) (income) Rental premiums (more true for

commercial than for residential) (income)

Enhanced retention (income)

Components, incentives

Source: 2007 Green Building Survey, National Real Estate Investor and Retail Traffic

Components, incentives

Equity/endowments/mission-based capital Traditional financing Real estate development

Federal▪ New Markets Tax Credits▪ Community Development Block Grants

State Energy Efficiency (http://www.dsireusa.org/)

Federal▪ DOE Weatherization▪ American Recovery Act Program▪ New Markets Tax Credits▪ EE Conservation Block Grants▪ HUD (NSP2 and technical assistance)

Tax credits State and local Utility company rebates/incentives

Water conservation State and local

Barriers to more green buildings

Source: Energy Efficiency in Buildings, World Business Council for Sustainable Development, July 2008

Thank you.

Federal Reserve Bank of AtlantaJanet.hamer@atl.frb.org

904-632-3588