Swedish property company Vasakronan was the first of the three corporate green bonds issued in November. This bond was linked primarily to housing assets with LEED gold status or BREEAM ‘very good’.
Energy efficiency can be a tricky area. LEED and BREEAM are great but these are materials standards, not building performance standards. As CICERO's Second Opinion on the bond notes, LEED and BREEAM “fall short of guaranteeing an environmentally-friendly building”. That means that they don’t necessarily predict the energy performance of a building, which is they key issue for energy efficiency metrics. The LEED points system, for example, allows a building to get points for reducing noise pollution or having bicycle parking.
CICERO's report recognises these limitations; they worked with Vasakronan to provide additional assurance to investors. This included adding site selection criteria (LEED doesn’t have site criteria and therefore you could build a very green home far away from any transport thus necessitating car use) and putting some mechanisms in place (Green Lease programme) to avoid the rebound effect. It is also worth noting that Vasakronan's corporate energy use that is 47% below the industry average.
CICERO has recognised exactly where all the issues lie so have ensured that Vasakronan provide additional assurances. This is great for this bond but possibly a little case-specific for rapid growth in the market. The detailed bespoke bespoke nature of CICERO's work with Vasakronan is not easily scalable - we’re not sure what would happen if 100 new bonds knocked on the door tomorrow. One way to get around this could be to have performance standards/hurdles in place for buildings which are monitored and reported over time – this way, even if the building is LEED, investors can still see whether the building is actually saving energy/carbon or not.
