The move to greener technologies in the construction and operation of buildings, combined with more climate-friendly capital markets, could reduce emissions across the global construction sector value chain by almost a quarter over the next decade, according to new research supported by the World Bank. Bank.
A new report has been published of the International Finance Corporation (IFC) – part of the World Bank Group – estimates that such efforts could reduce greenhouse gas emissions from the global construction sector by as much as 23 percent by 2035.
Moreover, it could simultaneously create new investment opportunities in emerging markets worth $1.5 trillion over the next decade, where around 55 percent of the IFC’s projected emissions reductions could be achieved, the report said.
The global construction sector is a major emitter of greenhouse gases and is responsible for around 40 percent of global energy and industrial CO2 emissions in the wider value chain, which includes the construction and operation of new buildings, as well as the carbon-intensive production of materials such as cement and steel.
According to IFC, much of these emissions are generated in emerging markets, where growing populations have caused a spike in demand for the construction of new homes and infrastructure.
Currently, however, these markets often rely on more carbon-intensive construction methods and materials, and on current trends, construction emissions are expected to rise 13 percent globally by 2035 if no mitigation or adaptation efforts are made, the report estimates .
With the right enabling measures, we could see a wave of private sector financing that will capitalize on the enormous opportunities.
But it is said that adopting energy-saving design, construction and operations practices, as well as access to climate-friendly capital markets that channel more investment into the construction value chain, could reduce emissions by 12.8 percent by 2035 compared to 2022 level.
The IFC said such measures could deliver a “significant breakthrough” in the fight against climate change, reducing the risk of extreme weather events, which it said are causing “increasingly high” economic and human costs for the world’s poorest populations threatened to impose.
“The green construction revolution is gaining speed,” says IFC director Makhtar Diop. “With the right enabling measures, we could see a wave of private sector financing that will capitalize on the enormous opportunity and huge need to transition to sustainable construction in emerging markets.”
The report outlines a number of actions to help drive the uptake of green building practices, materials and technologies in emerging economies, citing examples such as improved energy efficient codes and standards, greening government buildings and procurement, and carbon pricing policies.
Such green financing deals appear to be on the rise, with global private debt financing for green construction projects increasing twentyfold.
Technical assistance and financial instruments – such as sustainability-related bonds, green mortgages, green funds, carbon transition bonds and carbon pension portfolios – could also help capitalize on investment opportunities, the report says.
Such green financing deals appear to be on the rise, with global private debt financing for green construction projects increasing twenty-fold, from around $10 billion in 2017 to a “record high” of $230 billion in 2021.
However, the IFC said only about 10 percent of that issuance was in emerging markets.
The report also outlines a cost-benefit analysis of adopting existing technologies to reduce emissions. For construction activities, which it says are responsible for about half of all construction-related emissions, renewable energies and new materials such as reflective paint for roofs and film coating for windows can “significantly” reduce emissions and deliver significant cost savings over time.
For new buildings, the report suggests the use of greener materials, energy-efficient and resilient designs, as well as rainwater harvesting and district cooling as “attractive options” for emissions reductions. It also suggests switching to greener processes, raw materials and non-fossil fuels to reduce CO2 emissions from building materials.