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HSBC Transition Pathways: Opportunities and challenges of retrofitting in Real Estate
40 Plays2 years ago
Retrofitting existing buildings to make them more sustainable is a growing trend as the real estate industry looks to meet net zero targets. In this podcast, we examine the potential of retrofitting to reduce energy emissions. We look at how it works, what investors and developers can expect, and what the financials are in the current market, from both a UK and Asia perspective.
Guests Matt Mason, Partner and Head of Development at Crosstree Real Estate Partners in the UK, and Annie Feng, Sustainability Lead for Asia Pacific at Arcadis, join host Vivian Wong, Director of Real Estate Finance, HSBC Hong Kong to discuss the opportunities and challenges in the sector.
For more information on HSBC’s Transition Pathways Real Estate findings discussed in the episode visit here.
Hosted on Acast. See acast.com/privacy for more information.
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Transcript
Introduction to HSBC Global Viewpoint
00:00:02
Speaker
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
00:00:13
Speaker
Make sure you're subscribed to stay up to date with new episodes.
00:00:16
Speaker
Thanks for listening.
00:00:17
Speaker
And now onto today's show.
Retrofitting in Mature Cities: Importance and Challenges
00:00:24
Speaker
Vivian Wong, Director of Real Estate Finance at HSBC in Hong Kong, and I will be hosting our discussion today on retrofitting as part of our Transition Pathways series.
00:00:34
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In mature cities, 80% of today's buildings will still be in use in 2050, according to a study by JLL.
00:00:42
Speaker
Retrofitting the world's existing real estate to reduce energy-related emissions is therefore essential for the transition to net zero.
00:00:49
Speaker
But higher interest rates and declining property prices are adding to the challenge for property owners.
00:00:55
Speaker
How can they justify CapEx investments at this point in the real estate cycle?
00:01:00
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This podcast will take stock of real estate's progress with retrofitting and ask what can be done to increase momentum in a declining property market.
00:01:09
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How can financial institutions support this process?
00:01:12
Speaker
What do institutional investors expect?
00:01:16
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What do owners and developers need from their suppliers?
00:01:19
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And how does a building ultimately reach net zero?
Guest Introduction: Matt Mason and Annie Feng
00:01:23
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To cover this topic, we are delighted to welcome Matt Mason, Partner and Head of Development of Crosstree Real Estate Partners,
00:01:31
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a property investment firm based in London with a focus on UK properties.
00:01:35
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And Annie Feng at Arcadis, a consulting firm that runs the global project management office for HSBC capital projects globally.
00:01:44
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Annie is the sustainability lead for Asia Pacific, focusing on sustainable buildings and workspace, delivering the sustainable improvement program for HSBC's portfolio in the region.
00:01:56
Speaker
Welcome Matt, welcome Annie.
00:01:58
Speaker
Hi.
00:01:58
Speaker
Thanks for having me.
00:02:00
Speaker
Let's start with some scene setting on retrofitting real estate.
Cost-Effective Refurbishment Strategies
00:02:03
Speaker
Coming to you first, Matt, your business focuses on renovating mixed-use properties.
00:02:09
Speaker
Can you explain the commercial opportunities you see of refitting compared to redeveloping?
00:02:15
Speaker
I'll use our Barclays Street project as a good example of this.
00:02:20
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I think this is a scheme that we've owned for the best part of 11 years, and we've looked at it as both a new building and a refurbishment.
00:02:26
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And we found that a refurbishment of the existing building was more cost effective, was quicker.
00:02:32
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And at the end, the product that we've created is as good as anything that we could have created as a new build.
00:02:38
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So it doesn't feel as though you have to make compromises to retrofit an existing building.
Challenges in Commercial Real Estate Retrofitting
00:02:43
Speaker
How would you describe some typical challenges involved in refitting commercial real estate?
00:02:50
Speaker
I think the biggest challenge is understanding the risk of what it is you've actually got and when that risk occurs.
00:02:57
Speaker
In a new build project, you're building everything from ground up.
00:03:01
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It's much more straightforward.
00:03:03
Speaker
In a refurbishment refit situation, it's a bit like an onion.
00:03:07
Speaker
You just keep peeling off layers and layers and eventually you find exactly what it is you need to find in order to be able to refurbish and refit.
00:03:15
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And the biggest challenge of that is when that occurs in the construction cycle.
00:03:20
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And obviously, the later it occurs in the construction cycle, the more costly it is.
00:03:24
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So that's the big risk, finding out all of those unknowns as early as you possibly can.
00:03:29
Speaker
And you would say that that's also what you came across in number one, Berkeley Street.
00:03:33
Speaker
Was there anything that you didn't expect that cropped up?
00:03:38
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I mean, we've been doing this for a while now, so on other buildings.
00:03:41
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So we developed the old Camden Town Hall annex into the standard hotel opposite Kings Cross.
00:03:46
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We found an awful lot there that we weren't expecting.
00:03:48
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And I think we learned from that and we put that experiences into what we have here at Barclay.
00:03:53
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And so actually it was relatively small areas of, you know, bits of beams that we didn't expect to see or a bit of floor slab here and there or just a slightly different detail.
00:04:04
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There was nothing major.
00:04:05
Speaker
So we were able to actually manage those risks reasonably well.
00:04:08
Speaker
It's a mixed use hotel office fit out scheme.
00:04:11
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We also chose to procure it in a way that allowed us to change our mind and to be able to take those challenges, if you like, from the existing building into a separate fit out contract.
00:04:23
Speaker
So we already knew about them when we bought it.
00:04:25
Speaker
I see.
00:04:26
Speaker
And Annie, how does this chime with your experience?
00:04:30
Speaker
Are clients generally open to the idea of renovating an existing property rather than rebuilding?
Asia Pacific's Openness to Retrofitting
00:04:36
Speaker
Yeah, I definitely see the uncertainty, the challenge that Matt mentioned.
00:04:40
Speaker
And I think adding to that is the technical complexity of retrofitting existing building compared to new builds.
00:04:47
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There's some additional technical challenges that I would see with existing buildings.
00:04:54
Speaker
But however, like from my experience, my quick response to your answer is yes, that we are seeing more clients open to retrofitting existing buildings in Asia Pacific.
00:05:05
Speaker
For example, HSBC is currently going through a metro plan process where we are retrofitting the bank's portfolio with the primary objective to upgrade the workspace environment for the staff, while at the same time improving the portfolio sustainability performance.
00:05:22
Speaker
For example, we are replacing old chiller systems with more efficient units.
00:05:27
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Installing occupancy sensors to better control lighting and air conditioning operation.
00:05:33
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And also we're fitting out more sustainable materials such as using refurbished furniture and installing low carbon carpet tiles.
00:05:42
Speaker
So, yeah, we are actually seeing this retrofitting happening in Asia as well.
00:05:48
Speaker
I look forward to experiencing that on my floor, Annie.
00:05:51
Speaker
Yes.
Regulatory Push for Retrofitting
00:05:52
Speaker
Moving on, the default approach to meeting new higher building standards, such as for energy efficiency, has historically been to demolish and rebuild, especially in the commercial real estate segment.
00:06:05
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But that seems to be changing as regulators increasingly push property developers and investors to retrofit
00:06:12
Speaker
on the basis that doing so produces less carbon emissions than rebuilding.
00:06:17
Speaker
Coming to you first again, Matt, to what extent are you seeing this trend?
00:06:21
Speaker
And presumably it provides more certainty around the investment case for retrofitting, which after all can be very capital intensive.
00:06:29
Speaker
Yeah, I think that's right in that regulators, particularly in the UK, particularly actually in London, have been doing that for some time.
00:06:37
Speaker
I mean,
00:06:39
Speaker
Love it or loathe it, the Greater London Authority, which has been around for the best part now of 20 years, has for those 20 years really been pushing the boundaries on this stuff.
00:06:48
Speaker
So in London, and I make the distinction London to the UK, in London in particular, regulation around carbon, around energy and around sort of energy consumption and energy performance has been a big issue for the last 20 years.
00:07:02
Speaker
And gradually that's got firmer and harder to be able to deal with new buildings.
00:07:07
Speaker
I think the other thing that you've also got to remember, certainly again in the London market, is most bad buildings, as let's call them, have been demolished and have been rebuilt.
00:07:18
Speaker
So we're now dealing with stock that is 30 years old that was built in the middle of the 90s.
00:07:23
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So actually, it's got good bones.
00:07:25
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Most of it is really good stuff.
00:07:28
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And as a result of that, it's much easier to be able to retrofit anyway.
00:07:32
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So we're not dealing with buildings that are poorly insulated,
00:07:37
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poor floor to ceiling high, it's inadequate from a structural point of view.
00:07:40
Speaker
They're actually good buildings in the first place, so much easier to retrofit.
00:07:44
Speaker
Thank you, Matt.
00:07:45
Speaker
And as a follow-on to that, there's a new HSBC survey of real estate developers and investors' views and plans on net zero
00:07:54
Speaker
suggesting that the UK property sector is further along the transition than many other countries.
00:07:59
Speaker
I guess that gels with what you just said about the authorities.
00:08:03
Speaker
I'm talking about this for a number of decades now.
00:08:07
Speaker
The UK companies are therefore more likely to see net zero as fundamentally more important to their growth and more likely to say they have a formal transition plan in place.
00:08:18
Speaker
That may be partly because industry requirements on emissions are tighter than in other markets.
00:08:24
Speaker
Would you have anything to add in terms of your views
UK Market's Sustainability Focus
00:08:27
Speaker
on that?
00:08:27
Speaker
Yeah, but I think the whole market in the UK is tuned into it.
00:08:31
Speaker
So,
00:08:32
Speaker
whether you be a developer or whether it be one of your customers, i.e.
00:08:36
Speaker
your occupiers, or whether it be people that are lending you money, I just say, and a bank, or whether it be your investors, it's important to everybody across that entire sort of cross section of people that we're hitting carbon targets, sustainability targets,
00:08:50
Speaker
It's an expectation, I think, now in the UK that our buildings perform in that manner.
00:08:55
Speaker
So I guess that's why the UK real estate sector, coupled with what I said earlier on about the sort of the GLA and legislation, everything else is a bit further ahead than maybe areas of the world.
00:09:06
Speaker
And would you say that it's really the EPC related regulations that are driving this that people are looking to, or is it more than that?
00:09:13
Speaker
I think it's more than that.
00:09:14
Speaker
I mean, the EPC is a good headline for, you know, 2027 to EPC-C, 2029 to EPC-B.
00:09:22
Speaker
And that will have an effect over the next couple of years, no doubt about it.
00:09:25
Speaker
But even before then,
00:09:26
Speaker
You know, people are looking at buildings in a completely different way.
00:09:29
Speaker
And there is an expectation, as I said, from that cross section of people that are effectively stakeholders in any development and investment process that they want to see good carbon figures.
00:09:38
Speaker
They want to see sustainable buildings and they want to make sure that their money is going in into that direction.
00:09:44
Speaker
Thank you very much, Matt.
00:09:45
Speaker
And coming to you, Annie, how are you seeing policymakers addressing property sector emissions in Asia Pacific?
Regional Approaches to Retrofitting
00:09:52
Speaker
To what extent are they focusing on retrofitting?
00:09:55
Speaker
And also, how about the corporate and investor clients you work with?
00:10:00
Speaker
And can you point to any markets as examples?
00:10:03
Speaker
So I think a very good example is actually Singapore, where the government recognised that retrofitting existing buildings is a critical contribution towards the country's 2030 targets set within its Green Building Master Plan, which in turn is used to accelerate the country's transition towards a low carbon built environment.
00:10:24
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So early last year, Singapore actually released the Green Mart incentive scheme for existing buildings, which actually upscale the energy efficiency requirement for getting the Green Mart scheme and also linking up the incentive amount with how much emissions are reduced through upgrading the older systems.
00:10:44
Speaker
So I think Singapore as a market has a very healthy regulatory requirement environment and also very strong incentive schemes to drive property owners, developers and also investor towards the retrofit markets.
00:10:59
Speaker
Another very key player in Asia is actually China.
00:11:03
Speaker
So China is the second largest building energy consumer globally.
00:11:08
Speaker
This is according to the IEA statistics.
00:11:11
Speaker
Like Matt mentioned, a challenge in China is that the building quality is not as good, that a lot of the older buildings, like those that built in the 60s to 80s, are in the process of being demolished and for rebuild.
00:11:27
Speaker
However, the newer buildings that are in the 90s, unlike the UK markets, they are not necessarily in good conditions.
00:11:35
Speaker
So that makes the market facing a higher challenge technically and lots more uncertainty into retrofitting these older buildings.
00:11:45
Speaker
However, as a country, China has set forth in its previous five-year plan to retrofit more than 500 million square metres of existing buildings during the 2016 to 2020 periods.
00:12:00
Speaker
But however, the statistics show that there are lots of barriers that to really make this target possible.
00:12:07
Speaker
Barriers like financial support and the specific green retrofit policy are not there to support, to become the driver towards this building retrofit, not like Singapore markets.
00:12:20
Speaker
I understand.
00:12:21
Speaker
Thank you very much, Annie.
00:12:23
Speaker
Following on from what you said,
00:12:26
Speaker
It's noticed that the long-term trend may be towards greener buildings, but upgrading or redeveloping real estate both require high outlay, which I think is something that both of you alluded to earlier.
Impact of Market Conditions on Retrofitting
00:12:38
Speaker
And coupled with that, we have higher interest rates and declining property prices in many markets, which could make heavy capital expenditure even harder to justify.
00:12:48
Speaker
Maybe I'll come to you first again, Matt.
00:12:50
Speaker
Would you agree with that statement?
00:12:52
Speaker
And how are you coping with this environment?
00:12:55
Speaker
I guess that's not specific to retrofit.
00:12:57
Speaker
That's just a challenge of the market right now.
00:13:01
Speaker
And there are pockets of the market.
00:13:03
Speaker
You know, Mayfair is a good example where actually rental growth is exponential for a real grade A kit.
00:13:09
Speaker
And as a result of which there is actually an opportunity right now to be able to take a building that is, you know, coming back to your EPC point, you know, an EPC,
00:13:19
Speaker
D or E and there is a really good business case to spend money to upgrade that to an EPC A or B and you will get you'll get payback on that very quickly because of where the market's at.
00:13:29
Speaker
So there are pockets of that market.
00:13:31
Speaker
It's a challenging market for everyone, no matter what you're doing at the moment.
00:13:35
Speaker
And therefore, the bar is high in terms of certainly what we are looking to do right now.
00:13:40
Speaker
But we're finding some opportunities, but it's tough.
00:13:42
Speaker
Yeah.
00:13:43
Speaker
And Annie, what's your take on that when it comes to property developers and investors?
00:13:49
Speaker
Yeah, definitely.
00:13:50
Speaker
Without significant capital investment, it's difficult to bring an older building up to the level of efficiency that are possible in a new build.
00:13:59
Speaker
But if we look at the longer life cycle of the buildings, the initial capital expenditure will bring the buildings in line with high standards of energy efficiency and also improving the occupancy experience.
00:14:12
Speaker
So potentially, this will give these buildings a new lease life with potentially higher returns.
00:14:17
Speaker
Also, from the investor and developer perspective, we talk about a lot of ESG disclosure.
00:14:24
Speaker
This could be a contribution in limiting climate disruption, fulfilling their ESG commitments.
00:14:31
Speaker
I would like to use a recent case of a very simple chuler replacement project in a HSBC building in Hong Kong to illustrate the difference in consideration of life cycle.
00:14:44
Speaker
If we take a longer building cycle view to include, for example, total expenditure to the equation, this may help us to view this differently.
00:14:55
Speaker
Within this chiller replacement project, chiller A is a 1 million Hong Kong dollars more expensive than chiller B in terms of capex investment, which is about 28% more.
00:15:08
Speaker
But when it comes to OPEX for one year of the operation, the type A chiller is actually 29% less costly compared to type B. So the simple payback period for choosing type A is just about 1.2 years.
00:15:23
Speaker
Considering an operational lifespan of 10 to 20 years, Type A will actually bring up about HK$5 million savings to HSBC compared to choosing Type B, although initially it would have a lower capex initially.
00:15:40
Speaker
So I think this is hopefully a small, simple project to provide a different view of how we can see the lifecycle of a project or a building.
00:15:51
Speaker
Furthermore, if we also look at the whole life cycle carbon of the building, where embodied carbon saving will come to the equation, upgrading or retrofitting existing buildings could actually be more favourable.
00:16:05
Speaker
Understood.
00:16:06
Speaker
Thank you, Annie.
00:16:06
Speaker
So despite it being a tough environment, capital is clearly being spent.
00:16:11
Speaker
So let's dig a little bit deeper into what actions real estate developers and investors are taking to reduce their emissions.
00:16:19
Speaker
In our survey, property developers came out as slightly ahead of investors on many of the actions taken in pursuit of net zero.
On-Site Electrification and Energy Efficiency
00:16:27
Speaker
The general impression is that developers are more likely to invest in things like on-site electrification and switching to renewable energy than investors, perhaps because divestment is still the easiest way for investors to tackle their carbon footprint.
00:16:43
Speaker
Coming to you first again, Matt, would you agree with that statement or not quite?
00:16:48
Speaker
I mean, I think it's more complex than that.
00:16:50
Speaker
And the one thing that's sort of not in that survey by the Senate is this carbon in use point, which Annie made as well.
00:16:55
Speaker
And whole life carbon on a building is becoming more and more important in the UK now.
00:17:00
Speaker
How you design a building now so that in 30 years time, it can be retrofitted much easier.
00:17:07
Speaker
It can be a different type of use.
00:17:09
Speaker
So office can go to residential, residential can go to hotel, hotel can go to office.
00:17:15
Speaker
and how all of that works together, I think is really important.
00:17:18
Speaker
And as I say, the carbon footprint, if you like, of everything that we do seems, for me anyway, seems to be the most important thing.
00:17:25
Speaker
Of course, electrification and sustainability and all the efficiencies come into that and how you use the building, but it's that use of carbon in particular that I think is the real focus in the UK.
00:17:35
Speaker
Thank you.
00:17:36
Speaker
Looking back at HSBC survey results,
00:17:39
Speaker
On the overall basis, the survey also found that the top three CAPEX priorities for respondents were energy efficiency, electrification, and renewable power generation.
00:17:50
Speaker
Matt, how do these fit with your priorities for refitting?
00:17:54
Speaker
Energy efficiency, I think, is probably the number one item for us.
00:17:58
Speaker
The rest of those on there may well be a solution to that energy efficiency, but it's the energy efficiency that we're looking for in everything we do.
00:18:06
Speaker
And as I said, that sort of that carbon in use and whole life cycle carbon are the important things for us.
00:18:13
Speaker
Thank you very much.
00:18:15
Speaker
And looking back again at the survey results, waste and water optimization was seen as more important by respondents in Asia than in other regions.
00:18:24
Speaker
Coming to you this time, Annie, what are you seeing your property sector clients prioritizing in terms of CapEx spend on emissions reduction when it comes to retrofitting?
00:18:35
Speaker
I think that it's a very interesting response from that survey, but I guess it will also come down to the different materiality importance view by the clients that responded to the survey.
00:18:46
Speaker
Because I think I will echo Matt say that energy efficiency would still be the key drivers when coming to retrofitting for emission reduction.
00:18:58
Speaker
So, for example, when it comes to retrofitting with the HSBC properties, we do have waste diversion goals, we have minimum water design requirement, but energy reduction remains the most important and most effective cap expense to reduce emission overall.
00:19:16
Speaker
Following and linked to this, technology developments ranked as one of the main accelerators for transition in the sector in the HSBC survey results.
Technologies Aiding Retrofitting
00:19:26
Speaker
So what sort of new technologies are you seeing emerge that are supporting the move to net zero?
00:19:32
Speaker
Maybe this time we come to you first, Annie, and then we go to Matt.
00:19:36
Speaker
Thanks.
00:19:38
Speaker
Yeah, there is a statement from a recent market research that transition to net zero is a technology transition.
00:19:45
Speaker
So undeniably, technology stands at the center as an enabler to make existing buildings with high standards of energy efficiency.
00:19:55
Speaker
So I think roughly, I think I would group the new type of technology into phase one, techs that are already in market and being used to improve the way we use energy in the building.
00:20:06
Speaker
Some of these are like sophisticated building energy model to inform sunlight heating direction that would provide into the retrofit design and also smart building management system or the BMS that monitor and actually manage building energy demand and also efficient and intelligent HVAC system that minimise overheating or cooling.
00:20:29
Speaker
For HSBC, we did an analysis that for most of our buildings, HVAC can account for as high as 60% of the energy demand.
00:20:39
Speaker
Therefore, having very efficient and intelligent system, it's very effective to control the energy usage for our properties.
00:20:49
Speaker
And of course, the fairly commonly applied solar PV system to provide onsite green energy.
00:20:55
Speaker
So these are the type of technology that we have seen that it's already being used in the market.
00:21:01
Speaker
Then there comes the phase two techs that are those that not yet at large scale market deployment.
00:21:07
Speaker
However, we have seen them being pilot at large corporates, for example, Microsoft in China.
00:21:14
Speaker
So these are like BIPVs, hydrogen cells and energy storage battery units.
00:21:20
Speaker
Thank you very much, Shani.
00:21:22
Speaker
And I guess a lot of it is really behavioral driven, right?
00:21:25
Speaker
So it's all about energy efficiency based on what both yourself and Matt said, and Matt will come on to you as well shortly.
00:21:32
Speaker
But I do feel that it's really about behavioral and how you actually use the property.
00:21:38
Speaker
Matt, anything further you'd like to add?
00:21:40
Speaker
Yeah, I mean, I think I'd echo that, right, which is it's about user interface.
00:21:44
Speaker
And I think that's where we're seeing new technologies probably make the biggest difference.
00:21:49
Speaker
Because all the rest of that stuff, if you like, is already happening anyway, with regards to how the HVAC system works, the BMS, you know, hydrogen cells, you know, solar, PVs, wind, that's all really, really good stuff.
00:22:00
Speaker
But we're seeing technologies now that
00:22:03
Speaker
inform users how they're using the building and therefore what their personal energy usage.
00:22:09
Speaker
And actually, I think that will have a bigger difference on energy efficiency than anything else, because it's people effectively that are switching the air conditioning on when they shouldn't be or opening a window when they shouldn't be or leaving the lights on when they shouldn't be.
00:22:23
Speaker
And particularly when it comes to uses in hotel or residential type of uses, student co-living,
00:22:31
Speaker
et cetera, et cetera.
00:22:31
Speaker
Then it's, it's a, it's, there's something there to actually show people what their personal energy use is, what their benchmark should be and what they're actually doing.
00:22:40
Speaker
And we've found that technology to start to really be used now in those environments.
00:22:45
Speaker
Thank you, Matt.
00:22:46
Speaker
Very insightful.
Financing Solutions for Retrofitting
00:22:48
Speaker
Last, but certainly not least, let's talk specifically about financing availability and solutions.
00:22:54
Speaker
This is very interesting for me because I'm a real estate finance banker.
00:22:58
Speaker
So this is my territory.
00:23:00
Speaker
So traditionally, lenders and investors have been keener to finance new builds than retrofits because new developments tend to have greater and more obvious return potential.
00:23:11
Speaker
But nowadays, they seem to be more open to sustainable refitting of property.
00:23:16
Speaker
So Matt, how easy are you finding it these days to finance renovations and energy efficiency initiatives?
00:23:23
Speaker
And are you seeing new types of financing solutions?
00:23:26
Speaker
And if so, how effective are they really?
00:23:29
Speaker
I think the finance market, certainly in the UK, has got their head around it pretty quickly.
00:23:33
Speaker
And if anything, the sort of the green loan initiatives that most banks now provide are a key part of your own sort of requirements for your own investors and for your own reporting.
00:23:44
Speaker
Being able to be part of that process, I think, helps.
00:23:48
Speaker
So we're certainly not seeing any sort of kickback against retrofitting in the finance market.
00:23:54
Speaker
There's obviously different, in the UK anyway, there's obviously different types of UK grants and government grants you can get that also count towards retrofitting, whether that be from a tax point of view or whether that be from a sort of a pure capex point of view.
00:24:07
Speaker
So actually, the market over here is very much set up, I think, to finance in that way.
00:24:13
Speaker
And Annie, what are you hearing from your clients and seeing in the market about funding availability?
00:24:18
Speaker
And can you give any examples of trends or deals you've seen in certain Asian markets?
00:24:24
Speaker
Coming back to this is, again, the Singapore case with several building retrofit fundings being available in the market.
00:24:31
Speaker
So just now we mentioned the green mark incentive schemes.
00:24:35
Speaker
So under this scheme, the building projects that pursue higher standards of energy efficiency will be eligible for higher rates of funding.
00:24:43
Speaker
As an example, buildings that can achieve the highest green mark rating of zero energy after retrofitting will get...
00:24:52
Speaker
about 45 Singapore dollars for each ton of carbon reduced.
00:24:57
Speaker
Of course, it's kept at a certain limit.
00:25:00
Speaker
And also, I understand that in Singapore, there are also other schemes.
00:25:04
Speaker
For example, the Building Construction Authority of Singapore also launched the Building Retrofit Energy Efficiency Financing Scheme, which is facilitated by the authority and also the participating financial institutions.
00:25:18
Speaker
and also the sustainability loan that Matt just mentioned is also available in Singapore.
00:25:23
Speaker
So coming to Hong Kong, it's also we see a similar trend being available.
00:25:29
Speaker
Just provide an actual example that last year we had an investor client together with a local property developer acquire an existing hotel property in Hong Kong, which they then use the green loan from a local bank to upgrade the building to a high-end service apartment.
00:25:46
Speaker
with the aim to attain the gold standard for the building.
00:25:50
Speaker
So the financing solution initially helped them with the initial capex investment.
00:25:55
Speaker
And of course, with the retrofit, making the building more energy efficient, as we shown previously, for the long run, it will actually help to reduce the building's operational costs in the long run.
00:26:07
Speaker
Thank you.
00:26:08
Speaker
So it seems like a combination of carrots and sticks.
00:26:11
Speaker
So maybe a final question for me on this topic.
00:26:14
Speaker
Would you say that, for both of you actually, would you say that there are more carrots at play or more sticks at play at this point in time?
00:26:23
Speaker
That's really difficult.
00:26:26
Speaker
I think the London market has always felt like there's quite a lot of sticks, particularly through the way that our planning system works.
00:26:33
Speaker
Right.
00:26:34
Speaker
But that said, when you look back at them in, you know, over a five year period, actually, there's as much as a carrot maybe than they can be, which is.
00:26:42
Speaker
In other words, you look back and you go, that was the right thing to do.
00:26:45
Speaker
We've got our returns from it.
00:26:47
Speaker
You know, we produced a good building.
00:26:49
Speaker
Yeah, our tenants are happy.
00:26:50
Speaker
Our investors are happy.
00:26:52
Speaker
You know, the market's happy.
00:26:53
Speaker
We're happy.
00:26:54
Speaker
So is it a stick or is it a carrot?
00:26:56
Speaker
It's a really difficult one.
00:26:57
Speaker
Thank you very much, Matt.
00:26:58
Speaker
Anything further to add from your nanny?
00:27:00
Speaker
My gut feeling being the year of rabbit, I think I prefer to say that it's more a carrot for the rabbits.
00:27:07
Speaker
Yeah, I see more carrots in the market.
00:27:10
Speaker
Thank you very much.
00:27:12
Speaker
With that, we are about out of time.
00:27:14
Speaker
Matt and Annie, thank you for sharing your insights and thoughts.
00:27:17
Speaker
It was great to hear your different perspectives and how this topic varies from the UK to Asia.
00:27:22
Speaker
And thank you to our listeners for taking the time to listen to this podcast.
00:27:26
Speaker
For more insights on today's conversation, visit our Transition Pathways website via the episode description.
00:27:32
Speaker
Thank you.
00:27:36
Speaker
Thank you for joining us at HSBC Global Viewpoint.
00:27:40
Speaker
We hope you enjoyed the discussion.
00:27:42
Speaker
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