The Market for Green Finance Instruments is Increasing

Green building certifications increased by 30% in 2020 with 255 new certifications, according to Property Forum EU. Such certification is driving increased investor interest as a means of reducing numerous financial and investment risk-types while addressing climate change mitigation. Green certification has translated into a competitive advantage for many real estate companies while creating opportunities for environmentally sustainable development throughout Europe.

In Poland, for example, increased market uptake of environmentally sustainable property certification assessment criteria is exhibited across a variety of real estate sectors and types of investors. While environmental sustainability in the Polish real estate arena started in the office sector it has proliferated across most major sectors.

While the Polish real estate market is nascent relative to Western European Countries, the majority of buildings completed in recent years have been equipped with modern and energy-efficient technical solutions. Modernization of the existing building stock in Poland has become a priority to reduce the risk of stranded assets as environmental performance expectations of investors are becoming increasingly ambitious.

Notably, in April 2021, 43 banks from 23 countries, each with balance sheet assets over €24.14bn, became founding members of the UN Net-Zero Banking Alliance, committing to align their credit and investment portfolios to net-zero CO₂ emissions by 2050 and setting mid-term targets for 2030. These commitments have made an impact in the green bond market for issuers as well as investors.

The Climate Bonds Initiative (‘CBI’) indicates that 2020 was a record year in terms of the value of environmentally sustainable financial instruments issued, which amounted to €592.92bn globally, almost twice as much as the year before.