Commonwealth Bank rolls out green loans for sustainability upgrades to commercial property

It is the first loan of its kind to be offered to the commercial property sector by a major retail bank.

To be eligible, buildings must achieve a star rating improvement under the National Australian Built Environment Rating System (NABERS) or reduce the property’s carbon emissions by 30 per cent. A three-star rating is considered “average” in energy efficiency performance, while six stars is the highest rating awarded to market leaders in the field.

Many players in the commercial property industry are already responding to a shift in demand among corporate tenants and investors seeking greener property assets.

“A number of our clients have already started on their journey and are doing this work already,” said Michael Bennett, CBA’s general manager of property and construction finance. “This is to encourage clients who are sitting on the fence now.”

In Australia, buildings account for over half of electricity use and almost a quarter of emissions.

CBA executive general manager of business lending, Clare Morgan, said sustainability upgrades made commercial sense because they could boost the value of properties while reducing operational costs.

“We appreciate it’s a challenging time with some buildings experiencing reduced foot traffic or lower occupancy; however, for some businesses, this has become an ideal time to undertake building upgrades and property improvements, and we’ve already seen strong demand,” Ms Morgan said. 

Almost two-thirds of commercial office buildings were currently rated below five stars for their energy consumption, she added.

The NABERS system analyses a building’s energy efficiency, water usage, indoor air quality, waste management and carbon emissions. 

“The only way to get a better NABERS rating is to use less energy,” said NABERS director Carlos Flores. “If you install flashy technology that looks really good but doesn’t reduce energy and carbon emissions, it won’t help the environment, and it won’t get you a better NABERS rating.”

Upgrades could include installing solar panels, battery storage or water recycling systems, as well as upgrading ventilation, insulation or window design.

“Reducing emissions by 30 per cent in a couple of years requires a lot of concerted effort,” Mr Flores said. “It’s not going to happen by accident.” 

“Sometimes it requires capital upgrades, like replacing LED lighting or old airconditioning equipment. And sometimes, it requires improvements in how we run the building, like ensuring all equipment is off when not needed. Often, it is about doing both.”

The fine print of the loan contract will act as an “environmental KPI”, with energy targets to be met within a certain timeframe.

“For example, if your building was operating at a three-star NABERS Energy rating level, then it will have to set a target to achieve at least 4.5 stars by a certain date,” Mr Flores said.

While offices and shopping centres have received the most NABERS ratings, the system can cover apartments, hotels, data centres, hospitals and will soon include the residential aged care and retirement living sector.