Lessons from Europe, North America, and Asia: Financing Models that are Facilitating Building Energy Efficiency at Scale

A critical component of achieving energy and carbon dioxide reduction goals set forth in The Paris Agreement is reduction of energy usage in buildings, which account for over one-third of all global energy consumption. While it is widely understood that curbing energy usage in buildings at the scale necessary to limit climate change requires involvement from capital markets, few structures exist in the market today for institutional investors to deploy capital, resulting in the absence of energy efficiency as an asset class. In general, capital markets would operate where projects can be efficiently aggregated, standardized, and assessed for credit quality; conditions that are challenging to achieve in certain market segments. This paper will discuss work being carried out by a consortium of scientists, bankers, and policy analysts from Lawrence Berkeley National Laboratory, Rocky Mountain Institute, Citi, and the International Finance Corporation to develop and pilot new policies, tools, and financial products that can facilitate building energy efficiency investment at scale. This paper will include an assessment of the most critical barriers to the deployment of private capital for building energy efficiency projects in Europe, the United States, and China; recent examples of success; and lessons from current exploratory work in the United States and China to pilot new mechanisms that allow capital markets to better assess and bear the technical and credit risks of projects.