‘’PACENations- Growing the international market’’ is a 12-month feasibility study to collaborate with local networks, including Green Building Councils, who are looking to support their members to encourage building retrofit activity by enabling a financial solution.
As countries and regions around the world adopt policies and programs to aggressively reduce greenhouse gas emissions, there is a growing demand to design, build and retrofit more environmentally sustainable and resilient buildings. The long-term, fixed interest rate and affordable repayment options facilitated by PACE finance are an essential component to creating a built environment that is more cost-effective, resilient, and equitable.
PACENation and US Green Building Council have partnered to encourage greater building retrofit activity by utilizing PACE Finance to overcome financial barriers.
As the PACE market in the US is well established and generating a healthy pipeline of projects, PACENations strategy is to identify and engage governments outside the United States and help establish a PACE equivalent in those regions. The project will identify programs across the world where PACE (or a similar finance mechanism) is already being considered or where access to finance has been identified as a key barrier to undertaking building retrofit activity and stakeholders are looking for solutions.
PACE is a Uniquely Powerful Solution
PACE is proving that it can overcome barriers to wide scale adoption of energy efficiency (EE) in buildings:
- Proven Method: For decades, across the globe, state and local governments have used property tax-based assessments to finance projects that benefit private property owners and meet a public purpose. PACE or a similar financial instrument such as Building Upgrade Finance (Australia) reflects the growing importance that states and local governments place on reducing our demand for energy produced by burning fossil fuels.
- Attractive Financing/Return on Investment: PACE financing solves the upfront cost barrier by providing 100% financing. Extending repayment for up to 20 years (not exceeding the life of the improvements) makes EE projects immediately cash flow positive, which increases building value. Many building owners want to be “green” as long as the financial result is in the “black”.
- Unlimited Private Capital: Property taxes and assessments have a senior claim on property, so PACE projects are attractive investments to the enormous private capital market. Low interest cost PACE financing makes projects work with or without government subsidies and incentives.
- Transferability: Like all property taxes and assessments, PACE assessments transfer to new owners upon sale of a property, so building owners who may be thinking of selling can do EE projects, realize immediate benefit, and transfer both the benefit and obligation to repay to a new owner. Transferability of the PACE assessment is also an important safeguard for the financial sector, limiting exposure to defaults to just the assessments in arrears. Unsecured non-PACE financing would typically be extinguished and lost if a building fell into default.
- Local Nexus: Local interest in promoting EE in buildings is growing globally among community organizations and local governments, a promising trend because locally sponsored sustainability programs that employ proven trusted source marketing strategies are proven to be more effective. The nexus between PACE assessment financing and local municipal governments makes it ideally suited to support these local efforts.
What is the status of PACE (or similar mechanism) outside the US?
- PACECanada is a private non-profit education and advocacy organization dedicated to dramatically reducing Canada’s GHG footprint through the establishment of a dynamic and thriving PACE ecosystem in Canada. It promotes and helps facilitate the development and delivery of PACE programs through the provision of consultancy services and the dissemination of PACE information and resources. There are active PACE programs in British Columbia, Nova Scotia, and Ontario. Alberta has PACE enabling legislation and interest and discussions have bene taking place in New Brunswick, Quebec, and Saskatchewan.
- Australia has enabling legislation and programs for Environmental/Building Upgrade Finance available in three states (New South Wales, Victoria, and South Australia).
- South Africa has compliance targets for climate action as part of its commitment to the goals of the C40. City of Cape Town wants a climate target for buildings by 2030 and use of PACE type funding to drive uptake of renewable energy to meet the target. Upfront capital outlay is a barrier.
- EUROPACE Pilot- pilot in Spain wrapped up, await request for legislative amendments from local government
- UK Green Finance Institute – Coalition of cross sector parties to design and develop programs and finance mechanisms to retrofit homes and get money moving into low carbon buildings. PACE stood out as a clear winner and is being explored as a viable option and delivery methods for property linked finance
“Energy efficiency of the built environment has long been a challenge in the UK and the current energy crisis has worsened the situation, hence there is an urgent need for attractive new financial solutions to help decarbonise homes. Property Linked Finance is one such potential solution – it supports homeowners to fund the upfront costs of energy efficiency improvements with the unique characteristic that the finance is linked to the property, rather than the property owner, which directly addresses the “payback period barrier” that often deters homeowners from taking retrofit action.” Green Finance Institute
Call to action
If you are interested in finding out more about PACENations, find out more by contacting: