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05 September 2019 / article

Financial institutions promoting green development

Financial institutions increasingly promote projects with a sustainability purpose. They do this by providing green finance. In this blog, we will touch upon financial institutions as promotors of green finance in the Dutch real estate development market and summarise the new rules included in the Buildings Decree 2012.

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Financial institutions increasingly promote green finance. Although there is no commonly accepted definition, financial institutions generally use the term to refer to an financial instrument that incorporates / supports / requires positive environmental externalities (e.g. reduction of carbon emission). Through green finance, financial institutions aim to contribute to a sustainable green economy.

The current housing shortage in the Netherlands appears to be a catalyst for green developments. Several market players are looking into redeveloping commercial property for housing. Institutions that finance these redevelopment projects, need to comply with the Energy Performance of Buildings Directive. For example, they need energy labels, evidencing the energy performance of a building they financed. Labels range from A (very efficient) to G (very inefficient). Most institutions only provide credit for buildings with a high energy performance or for redevelopments aimed at obtaining a high performance rating.

New rules (as included in the Buildings Decree 2012 (Bouwbesluit 2012)), that will come into effect on 1 July 2020 will determine the energy performance of a new building on the basis of:

  1. the maximum energy requirement in kWh per square meter usable floor area per year;
  2. the maximum primary fossil energy consumption, also in kWh per square meter usable floor area per year; and
  3. the minimum share of 30 to 50 per cent of renewable energy.

Most financial institutions already encourage their clients to gain advice on how to make their properties more sustainable and promote tools to determine how sustainable a piece of real estate is. We expect that the requirements listed above will have an increasingly important role in the credit approval process.

For more information on project development and construction practice in the Netherlands, please be referred to https://www.lexology.LoyensLoeff - Project Development & Construction in the Netherlands and the Loyens & Loeff publication ‘Building in the Netherlands’. Development projects require a multidisciplinary approach, which Loyens & Loeff provides by combining the in-depth knowledge and expertise of its tax advisers, lawyers and civil law notaries.

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