Financing climate objectives for local government buildings – from a strategic vision to concrete financing solutions

A growing number of Flemish municipalities will start to develop Sustainable Energy and Climate Action Plans in the framework of the Covenant of Mayors 2030 during 2019. These local authorities commit to take actions with the aim to cut CO2 emissions by at least 40% by 2030 and increase resilience to climate change.  Part of the action plans is the accelerated improvement of the energy efficiency of public buildings, with the objective to achieve a climate neutral public building portfolio by 2050 or earlier.

Financing solutions are being developed through the FALCO project to support this objective.

The building and real estate portfolio of the province of West-Flanders and the province of Flemish-Brabant in Belgium are being used to develop and test these solutions. Both provinces have the ambition to realise a climate neutral building portfolio by respectively 2030 and 2040.

An initial analysis of the situation in both provinces indicated the need for a strategic real estate vision and the importance of good data and information to support well informed decision making.

What are the social tasks of a local authority in the future? What are the trends that will have an impact on the future demand for buildings? What are the functions of the current buildings and which functions will be required in the coming years and decades?

The answers to these questions are used by both provinces to achieve a better picture of the building portfolio required in future. This is then compared with the existing portfolio to define what has to be changed at individual building and property portfolio levels. This comparison exercise provides the information to estimate potential income from the building portfolio and of the costs to make it sustainable.

Financing solutions are developed in parallel to this process.  One of the conclusions in both provinces is the strong preference for public financing instead of third-party private financing. The healthy budgetary situation of both provinces makes this also possible.  As a result of this situation, the focus within FALCO has switched to the development of financing solutions to pay back initial investments.  This is possible through the realisation of (energy) savings, but also through the generation of income from the building portfolio itself. A result of this approach is the ability to minimise the total cost of the whole transition process for the taxpayers.

One of the financing solutions that has been developed is based on the maximisation of energy savings within a cost neutral budget. Classic Energy Performance Contracts (EPC) in Flanders lead to energy savings of around 27% in comparison with the baseline . By adapting this concept, it is now possible to increase the energy savings to around 40%.  This new EPC approach has been developed by Factor4 and is an important contribution to the funding of ambitious climate objectives of local authorities.

FALCO partners leading this breakthrough project: Province of West-Flanders, Province of Flemish-Brabant, Factor4, Tractebel