2024 in Green Building: What to Expect

Industry experts share trends and challenges for 2024 in this installment of our outlook series.

Coliseum Building in downtown Minneapolis

Originally built in 1917, the Coliseum Building in downtown Minneapolis is undergoing redevelopment. Now listed on the National Registry of Historic Places, the building has earned status as CIRRUS Low Carbon Verified Building. Image courtesy of C-PACE

Green building practices are increasingly prominent across the real estate industry because they save money, improve efficiency, lower carbon emissions and create healthy places for people to live, work and play in. Green building practices are essential tools in fighting climate change and reaching ESG goals. But how will investors finance these much-needed modifications?

After many years of making the case for why we need green buildings in the first place, there is a real convergence of financial resources, policy advances, growing business commitments and an abundance of technologies for emissions reductions, observed Mahesh Ramanujam, CEO of Global Network for Zero. “2023 will be remembered as the year when the resources and willpower needed to implement net zero solutions were assembled en masse,” he noted.

Green building theme: Net zero

Leaders in the green building community have set a common theme: achieving net zero. But progress has been slow.

“They want a shared definition of what zero emissions are, better ROI data to make the business case, and a roadmap they can leverage to get there successfully,” said Ramanujam.

On the policy front, the Inflation Reduction Act and local standards like New York’s LL97 have been making waves. Equally exciting is the Biden Administration’s focus on building performance standards for federal properties, “the landmark White House Climate Resilient Framework and new funding for energy codes and decarbonization,” Ramanujam noted.

The Biden Administration has also promised a national definition of zero-emissions buildings for non-federally owned properties.

READ ALSO: Building Performance Policies Across the US

This growing appetite for low-carbon building that exceeds baseline code has coincided with enthusiasm for new green development tools. One such tool is CIRRUS Low Carbon.

“Projects that meet the design specification qualify for lower cost capital to fund items in the building’s construction budget with a quantifiable water, utility or renewable impact, replacing more expensive options such as mezzanine financing or outside equity,” pointed out Tricia Baker, senior vice president of strategy & impact at PACE Equity.

The tool also secures data on energy-efficiency measures, which is highly appealing to investors, potential tenants and other stakeholders. “2023 closings with CIRRUS Low Carbon verification are projected to collectively save 68,000 metric tons of carbon, reduce utility spend by more than $27 million and save more than 103 million gallons of water over the projects’ lifetime, making a strong case for the influence of low carbon building,” Baker said.

Green building supporters

Developers across asset classes have adopted green building practices. Notable C-PACE closings this year included multifamily, industrial, hospitality and mixed-use properties, according to Baker.

“For most developers in these asset classes, a commitment to green building is rooted in the three-pronged benefits of financial impact, environmental responsibility and property marketability,” she revealed. More so, developers who pursue C-PACE financing and low-carbon verification for a project are increasingly returning to fund multiple projects with C-PACE, “firmly establishing green financing as a versatile funding mechanism in all commercial asset classes.”

Mark Lyles, associate director of codes and policy at New Buildings Institute, said he’s seen the multifamily sector make good strides at including green building features and pursuing sustainability initiatives in 2023. This is likely driven by several factors. Within the affordable housing sector, there are tax credits for projects willing to pursue various certification programs. On the market-rate side of things, developers race to distinguish themselves within a competitive market and are “looking for ways to finance higher levels of performance such as through C-PACE.” In addition, in a post-COVID-19 world, with more people working from home, building occupants are more aware of the importance of better building practices such as higher indoor air quality and lower utility bills, added Lyles.

READ ALSO: Who Will Bankroll the Greening of CRE?

Joshua Jeffers, founder & CEO at J. Jeffers & Co., explained that affordable housing developments that use Section 42 tax credits tend to result in new projects that include sustainable design. “This is likely a result of many state housing finance agencies mandating or incentivizing developers to include sustainable design as a part of their Qualified Allocation Plans,” he said.

Moreover, from a construction perspective, historic rehabilitation and adaptive reuse developments also tend to incorporate green building initiatives. “This may seem counterintuitive,” Jeffers said. “However, LEED ‘EB’ is a relatively lower standard for LEED certification than the standards required for new buildings.”

Typically, it’s easier to make an old building more energy efficient than it would be as a part of a substantial rehabilitation. After all, the greenest building is the one that already exists,” he reasoned.

READ ALSO: Raising the Bar for the Future of San Francisco’s Pier 70

Although all property classes can benefit from green building practices, large portfolios will benefit the most, according to Ramanujam. “For 15 years, I’ve been hearing the same thing: We need ROI, ROI, ROI,” he said. “It’s pretty easy to give an ROI case study for a single building, but what the industry is really lacking is a good portfolio ROI story.”

He is certain that the company that will step up and do that will not only create a “massive case that the industry desperately needs” but will also position itself above and apart from its competitors.

What to expect from green building financing in 2024?

Cleveland’s former Agora Theater building in Midtown will become The Residences and Offices at the Agora. The $15.5 million historic renovation is the first project in the U.S. designated as a CIRRUS Low Carbon project. Image courtesy of C-PACE

The current financial landscape is affecting all industries, and recession is still on the radar. So, green financing is a critical resource to alleviate the pressure of high-cost capital, Baker noted. She expects developers to focus in 2024 on maintaining strong project returns by relying on lower-cost green financing through green building verifications.

Nonetheless, if a recession does materialize, it could likely result in a slowdown in the construction industry for commercial property, according to Jeffers. However, high-interest rates in the traditional debt capital markets could make C-PACE lending an increasingly attractive alternative source for long-term, fixed-rate financing for commercial construction projects.

Baker sees green financing as a mainstream funding tool for commercial development, building on the momentum of C-PACE financing. This, too, will continue to grow as developers perceive it as an essential cornerstone in the capital stack rather than an optional addition.

New green investment opportunities will also increase. An example is the Cut Carbon Note green bond, which made its first appearance in 2023. Both individual and institutional investors can use this opportunity to contribute to the development of C-PACE-funded low-carbon CRE. “The first $30 million issuance of the $400 million Cut Carbon Note closed with participation from 70 investors, and a second issuance will be announced in the coming months,” said Baker.


Rather than a top-down strategy where the top five to 10 percent of the market is targeted with hopes that the rest follows, what the industry needs is a bottom-up strategy that greens existing buildings at scale, according to Ramanujam.

“I’ve seen this firsthand: Despite three decades of green building efforts, we only have 100,000+ or so green buildings globally,” he remarked. “To achieve true scalability, we need an incremental approach that provides the broader market with a roadmap to zero.” This is no small thing, because if “overly rigid, overbearing, or excessively holistic in our expectations, this may restrain many from even getting started,” he added.

Ramanujam recommends the same for individual owners: “I often hear from business leaders that they are looking to go really bold, and this is great, but I always stress to them that an all-at-once approach is usually rarely effective.”

His suggestion aligns with the Paris Agreement targets, taking incremental steps to transform the entire portfolio from the bottom up over time and demonstrate continuous improvement.

Ramanujam also believes that carbon insetting is the future of green building financing because it allows developers to finance carbon reduction initiatives on-site or within a building’s construction value chain.

“It also benefits companies in the long run because they aren’t wasting funding on offsets,” he said. “Many offsets expire after one or two years, so unless you identify permanent removal strategies or turn to insets, you have to keep purchasing them, which can add up for a business over time.”

Reality check into 2024

Alongside baseline building codes elevating to higher levels of energy efficiency, green building standards will evolve in 2024, to continue offering a higher standard than baseline code, Baker expects. Furthermore, she said collaborative partnerships will yield results in 2024 as stakeholders in green building pave new compliance paths pairing green building standards with lower-cost financing.

In 2023, PACE Equity and Passive Housing Institute U.S. announced a partnership that automatically qualifies Phius CORE and Phius ZERO passive buildings for the CIRRUS Low Carbon financing rate when approved for PACE Equity funding.

“The convergence of Phius passive building standards and CIRRUS Low Carbon’s lower cost capital unlocks a new qualification option that makes it easier for green developers to access green financing, and 2024 will likely feature projects that leverage both tools to achieve lower costs for passive buildings,” she detailed.

READ ALSO: Building the Case for Passive House Standards

While for new construction the Phius standards for CORE, CORE Prescriptive and ZERO will be largely as they were in 2021, Phius is working on a new standard for existing buildings, shared Lisa White, associate director at Phius.

Dubbed REVIVE 2024, it aims to prioritize the same passive principles as the existing program but with a completely new framework. On one hand, it will use power outage resilience to determine the appropriate enclosure upgrades, and, on the other, it will use a total building retrofit life cycle cost as the metric to minimize.

“While I’ve never been more optimistic for our industry, I think we also need to be realistic that the commercial real estate realm is also wrestling with some pretty serious challenges—office vacancy rates, high-interest rates making new deals difficult, declining property values and rising maturity defaults,” said Ramanujam.

While the momentum for net zero is tangible, the market will have to navigate some real challenges in 2024.

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