The first Environmental Upgrade Agreement has been signed under the City of Melbourne’s 1200 Building Program, opening the doors for significant investment in retrofitting Melbourne’s commercial building sector.

 

The signing between the City of Melbourne, Sustainable Melbourne Fund and building owner Varga Brothers will fund a $400,000 retrofit of 460 Collins Street that will result in a reduction of approximately 170 tonnes of CO2-e per year.

 

The funds will allow for the installation of an energy efficient chiller unit and building management system upgrade.

 

Chair of the Future Melbourne (Eco-City) Committee, Councillor Cathy Oke said the landmark signing meant Melbourne was leading the pack of cities in the UK, USA and Australia developing programs to finance large scale energy efficiency retrofitting in commercial buildings by linking local government charging powers to the lending capacities of financial institutions.

 

"The retrofitting revolution has begun. The opening of this financial mechanism is a key step toward unlocking $2 billion in retrofit activity in the municipality of Melbourne,” Cr Oke said.

 

She added that Council had worked closely with the financial sector to design a financial mechanism that would boost the uptake of commercial building retrofits in Melbourne by allowing building owners to borrow funds to create better performing buildings and repay this money at a reasonable rate.

 

“We know that access to affordable capital is a major barrier in retrofitting commercial buildings.

 

This signing marks an important milestone, removing this barrier and equipping building owners with the financial tools they need to reduce their energy use, save water and lower their carbon emissions.” Cr Oke said.

 

“More than 50 per cent of the municipality’s greenhouse gas emissions are generated by the commercial sector and we have an ambitious plan to catalyse the retrofit 1200 city buildings – two thirds of the city’s commercial buildings. We are confident this signing will be the first of many and that this new financial mechanism will help us reach our goal.”

 

Sustainable Melbourne Fund administers environmental upgrade finance on behalf of the City of Melbourne and is the financier of the 460 Collins Street project.

 

Sustainable Melbourne Fund Chief Executive Scott Bocskay said environmental upgrade finance enabled property owners to share the cost of retrofitting with tenants, who could also enjoy the benefits of higher performing tenancies.

 

“Building owners and occupiers can now access an innovative financial mechanism that enable them to unlock greater savings and improve competitiveness.”\

 

“Financiers now have a strong incentive to advance funds for retrofit works, with the ability to recover funds as a statutory charge providing them with certainty. The development of the environmental upgrade charge has created a new marketplace, underpinned by a new asset class,” Mr Bocskay said.

 

“Sustainable Melbourne Fund’s investment in the first agreement is representative of our commitment to developing this new market. We congratulate NAB for developing Australia’s first commercial financing structure for environmental upgrade finance and look forward to seeing many deals being transacted through this mechanism into the future.”

 

NAB’s Managing Director and Head of Property Finance, Andrew Balzan, said NAB has worked extensively with the City of Melbourne to successfully legislate this new initiative.

 

“The funding solution allows City of Melbourne to dually incentivise property owners and their tenants to upgrade buildings and reduce carbon costs. NAB is proud to be a part of developing Australia’s environmental finance market and looks forward to building on the programme,” Mr Balzan said.

 

NAB has partnered with Low Carbon Australia Limited and Eureka Funds Management Limited to develop Australia’s first Environmental Upgrade Agreement finance product.

 

Sustainable Melbourne Fund is also in the process of administering Environmental Upgrade Finance for a second pilot project that will be funded through NAB Environmental Upgrade Funding.