Finance

above 6 per cent adjusted for building occupancy levels. In terms of selling prices, the report found a premium in the order of 16 per cent. Further, empirical evidence of such valuation differentials is growing (RICS 2009). The business case for green property investment has emerged strongly with a considerable effect on the operation of the market. However, vast opportunities remain to scale up green property investment.

It is also increasingly being argued that collectively, ever more stringent regulations, rising energy prices and changing occupier and investor preferences will increasingly affect the context within which property investment and letting decisions take place (UNEP FI PWG 2011a). As a result, the expectation is growing that, over time, greener buildings will experience higher net income growth through lower depreciation and lower operational costs, and as a result, be viewed as less risky. Enforceable regulations that drive higher environmental standards, greater consistency between fiscal incentives

and policy objectives/targets for GHG reductions in buildings, and the promotion of metrics systems that are more compatible, simpler, more relevant to investors and more capable of capture across whole portfolios will be critical in accelerating the greening of property market.

Forestry – Reducing Emissions from Deforestation and Forest Degradation (REDD+) For the financial services and investment community, understanding and developing

prospective markets

related to biodiversity and ecosystems services (BES) is challenging. The coverage of actual demand and the estimates of potential market value for the banking, insurance and investment community are poor. However, several recent initiatives have begun to frame the potential in nascent existing markets and prospective future ones. For example, the 2008 value of the bio-carbon market was estimated by the Ecosystem Marketplace to be at US$ 37 million (see Table 4). This estimate includes the increasingly important concept of REDD+ (see Box 2).

Box 1: Copenhagen fast track financing – a status update

The Copenhagen Accord notes developed countries’ commitment to provide fast track financing of US$ 30 billion for the 2010 to 2012 period and building to US$ 100 billion per year by 2020.

This fast track financing will enhance action on mitigation, including Reducing Emissions from Deforestation and Forest Degradation (REDD), adaptation, technology development and transfer, and capacity building. Fast track financing will not only enhance implementation of the UNFCCC by developing countries between now and 2012, but also aims to help them prepare for sustained implementation beyond 2012. It is thus often referred to as enabling readiness for the post 2012 period. It will also provide lessons for climate financing over the longer term. The fundamental questions regarding the issue of fast track financing today are:

■ Commitments at the country level According to the World Resources Institute (WRI), country pledges today add up to roughly US$ 27.9 billion;

■ Are funds being disbursed or earmarked? Of the total of US$ 30 billion, only approximately US$ 5 billion have been committed in national budgets and allocation plans, and only thirty-two concrete programme activities have been earmarked to be supported by these funds. Developed countries, therefore, still have much to do to concretise their

pledges to remain credible regarding their financing commitments;

■ Are funds dedicated towards climate financing new and additional? At the time of writing of this report, it remains unclear as to whether the funds pledged will be entirely additional to existing commitments in the areas of climate change mitigation and adaptation in developing countries or, more broadly, ODA. However, some pledged funds will be additional. It appears that most, if not all, funding denominated as fast track financing under the Copenhagen Accord will be counted towards developed countries’ ODA efforts and reported as such to the OECD’s DAC (Development Assistance Committee) office. Past ODA efforts by developed countries have repeatedly been criticised for not reaching the target of 0.7 per cent of GDP, commonly referred to as a level of ODA commitments towards which developed countries should aim; and

■ Will public fast track money leverage private climate finance? Most, if not all, of the programmes put forward as qualifying for fast track financing aim at increasing the institutional capacity and readiness of developing countries to initiate climate change mitigation activities, rather than at directly reducing GHG emissions. These types of activities usually lack a commercial dimension or potential for private participation and, as such, will not be able to attract or generate private climate financing.

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