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Financing Ambitious Local Climate Objectives

Periodic Reporting for period 2 - FALCO (Financing Ambitious Local Climate Objectives)

Reporting period: 2018-12-01 to 2020-05-31

More than 180 local authorities of the Flemish region (Belgium) have signed the Covenant of Mayors (CoM) committing to reduce their greenhouse gas emissions by 20% by 2020 (or the new signatories 40 % by 2030). Among these local authorities, many have committed to go well beyond the CoM objectives, aspiring to achieve climate neutrality by 2050, … or even earlier. Flemish CoM signatories have prepared ambitious local climate action plans containing a vast array of emission reduction measures for different stakeholders. Given the sheer investment volume, the combined local climate action plans amount to a powerful economic recovery plan. However, most of these plans lack a comprehensive and robust financial plan. And without funding, even the best plan … is nothing more than a plan: no investments, no emission reductions, no economic recovery.
The main objective of the FALCO project is to further develop and pilot financing solutions that lift existing financial AND non-financial barriers, and to prove these solutions’ validity by realising a total investment portfolio of ca. 18 million euro in three main domains: 1) renovation of public buildings, 2) renovation of private buildings and 3) energy efficiency investments for SME’s. At the same time the FALCO project aims at developing accompanying (policy) measures that will boost the interest in emission reduction investments and the demand for the proposed financing solutions. The combination of financing solutions and accompanying measures should unlock a sustainable energy investments potential that has been left untapped until this day.
The work performed and the results obtained so far includes:
- WP2: identification of main barriers for investments and possible solutions for these barriers barrier – solutions matrix (Deliverable 2.1).
- WP3: selecting breakthrough projects, identifying barriers (financial and non-financial) for energy efficiency investments and developing financing solutions to lift these barriers. This resulted in following breakthrough projects:
• Social housing – currently on hold because of limiting context (legal barriers)
• Energy renovation of private houses (ER2.0) – feasibility is currently being tested in order to set up a ER2.0-fund
• Public buildings – identification and elaboration of financing solutions in different ambition scenarios. Accompanying measure: support to public authorities to develop a Sustainable Public Real Estate Management (SPREM) strategy.
• SMEs – implementation of a financing solution for ‘networked’ SMEs.
• Apartments – currently the consortium started exploring financing solutions for deep renovation of apartment buildings with many apartment owners.
- WP2: identification of possible overarching solutions that can support the individual financing solutions for the breakthrough projects (membership card system / overarching fund).
• Membership Card System (MCS) in order to capture part of the economic value of the market increase: market validation.
• Overarching fund: on hold until the financing solutions for the separate breakthrough projects have been fixed.
- WP4: feasibility test of the developed financing solutions (each of the breakthrough projects) – ongoing for most of the breakthrough projects (WP3) / market validation for the MCS.
- WP5: implementing the elaborated financing solutions (to start for most of the breakthrough projects – breakthrough project on SMEs already in implementation phase).
- WP6: a monitoring tool has been developed in order to monitor the investments that have been realised by FALCO.
- WP7: dissemination to Flanders & Europe – preparation activities performed for events that are still to be organised in order to disseminate results of the FALCO project and to test the replication potential of the solutions developed by FALCO.
The objective of the FALCO project is to develop financing solutions that make it possible to lift barriers for energy efficiency investments that go beyond business as usual. Moreover, financing solutions that are developed must be replicable for other – similar – investment project.
As such, solutions have been developed that must enable:
- SMEs to invest in energy efficiency, with an ESCO that takes the investment on its own balance during the design and investment phase and then sells the future flow of receivables to a bank once the installations have been commissioned. This results in an optimal allocation of the energy savings risk which is taken by the ESCO and the credit risk which is taken by the financial institution.
- Also, with regards to SMEs, a portfolio approach has been set up that combines investments in energy efficiency with investments in renewable energy production (mainly solar panels) thereby securing revenue streams and thus increasing the bankability of the project.
- Public buildings to invest in its own real estate portfolio in order to reach the objective of climate neutrality in 2030, 2040 or 2050. A basic level of Sustainable Public Real Estate Management is an important condition to make investments financeable.
- Private house owners to continue profiting from an energy loan with a longer reimbursement period than for personal loans at financial institutions and larger amounts.
- Apartments to be renovated, offering a financing solution fit for the association of co-owners.
More-over, a Membership Card System is being studied in order to capture part of the economic value of the market increase.
With the developed solution, we already realised ca. 7 mio € of investments (SMEs & private school), we are developing projects in public buildings – currently valued at ca. 6 mio € and estimate that ca. 20 mio € can follow during the FALCO term (public buildings, SMEs, apartments & private houses). We believe that with the solutions, that will continue to exist after the FALCO term (e.g. the ER2.0 fund), another 100 mio € will be invested in energy efficiency.
Socio-economic impacts related to the aforementioned investments include among others employment in the building sector in Flanders (energy renovation, energy efficiency technology sector) and increased capacities at the local authorities in financing their local climate action plans.