Unveiling of Générations 1,5 °C: la rentabilité du bâtiment durable, a study conducted by the Fonds immobilier de solidarité FTQ, Groupe Devimco, Hydro-Québec and Énergir

MONTRÉAL, Sept. 26, 2024 /CNW/ – The Fonds immobilier de solidarité FTQ and its partners, Groupe Devimco, Hydro-Québec and Énergir, today unveiled the findings of Générations 1,5 ̊C, an action-research project demonstrating the financial value of sustainable construction as Québec moves towards decarbonizing its built environment. The results were presented today to over 300 people from the real estate and finance industries.

Spearheaded by the Fonds immobilier and conducted by Akonovia, with the collaboration of Vertima for the life cycle assessments and BJC for the financial modelling, the study used complete data from the past year to model the financial performance of a multi-residential building in the Fonds immobilier’s portfolio built in 2018 at a cost of $60 million.

The study assessed the impact of additional investments in sustainable measures on the value of a property using, for example, a more efficient electromechanical system, a variety of energy systems and low-carbon materials.

A 45% increase in value 
The findings are conclusive: the value of a sustainably designed building can increase by as much as 45% in the 10th year following construction. For the purposes of this exercise, the construction cost of the reference building was discounted to $100 million, and its useful life was set at 60 years.

The sustainable measures chosen to improve its energy performance and reduce carbon intensity (operational and embodied carbon) entailed an additional investment of $6 million dollars (6%).

“The additional investment in optimizing the building’s environmental performance was well worth it, especially since climate change is getting worse and its impact will be felt ever more acutely in the real estate industry. We’ve shown that investing in a building’s sustainability and in both its physical and financial resilience is key to fighting climate change and to increasing its value,” said Serge Cormier, Vice-President, ESG, Value Creation and Sustainable Real Estate, at the Fonds immobilier de solidarité FTQ.

The Générations 1,5 ̊C study shows that incorporating sustainability into building design is no longer an option but an imperative, and that the time to act is now.

Quotes
“Based on the findings of the study, developers should consider making the additional upfront investment that sustainable construction may entail. It is more important than ever that operational and embodied carbon be reduced in new construction. As well, it’s worth noting that sustainable buildings can also offer additional value in terms of customer experience through the quality of spaces and indoor air.”

Caroline Girard,
Vice-President, Property Management, Groupe Devimco

“An important finding of the study is that carbon emissions associated with energy consumption are only part of the equation. A true decarbonization strategy must also take into account embodied carbon emissions, those associated, for example, with the manufacture of construction materials, which account for a large proportion of a project’s GHGs. As far as energy is concerned, the most important finding for Hydro-Québec is that by implementing measures to improve energy efficiency and manage power demand, you can have an almost zero-carbon building without increasing the energy or power demand.”

Éric Bernier,
Director, Business Customers and Energy Solutions, Hydro-Québec

“Buildings of the future will have to rely on renewable multi-energy systems, thus contributing not only to their physical and financial resilience but also helping to accelerate the decarbonization of the entire economy. System redundancy ensures the continuity of essential services such as space heating in the event of a breakdown, while the hybrid solutions proposed in the report are well suited to changing energy rates. The configurations selected for the study demonstrate the added value of complementary renewable electric and gas systems…”.

Brigitte Samson,
Senior Executive Director, Customer Energy Solutions & Customer Service, Énergir

“For a number of years now, the energy efficiency market has been looking only at the payback period for projects, targeting a five-year period. Against the backdrop of accelerating climate change, we should be looking more at the risk of not investing. If we look at the various risks, including having to reinvest in a building that will no longer meet market requirements, we are exposing ourselves to several potential risks.”

Philippe Hudon,
President, Akonovia

The modelling scenarios

Discounted construction cost in 2023 = $100 million ($60 million in 2018).Additional investment of 6% to improve energy performance and decarbonize (embedded and operational carbon) = $6 million.Energy modelling.GHG modelling, including fugitive emissions from refrigerants.Life cycle assessment of materials (embodied carbon), focusing mainly on the structure. The useful life was set at 60 years.Optimal selection of equipment and energy sources with the aim of achieving a just energy transition and improving the asset’s resilience. Two concepts were thus analyzed.Efficient use of electricity as the main source of energy;Use of renewable natural gas as a back-up or redundant power supply;Bioenergy;Thermal pump;Electromechanical equipment allowing full flexibility and the addition of future components depending on the availability of new renewable energy sources;Peak shaving (power management).Financial modelling.

Risks considered
A number of risks that could affect value over time were identified during modelling:

Decrease, limited increase or stagnation of rental income over time compared to the competition, which has evolved in line with changes to building codes and regulatory requirements;Increases in energy costs (electricity and gas);Price of carbon (embedded and operational);Bank interest rate incentives or penalties;Variation in insurance costs;Variation in exit cap rate.

Reference building (existing)

Initial cash flow = 100%Adjusted cash flow after 7 years = 85% (15% loss)Cash flow in year 10 following retrofit obligation in year 7 due to stricter regulatory requirements = 20% (80% loss)

Energy-efficient building (additional upfront investment of 6%):

Initial cash flow = 85% (due to additional investment)No retrofit requiredCash flow in year 10 due to the elimination of the main risks that could affect its value = 130% (45% gain)

Definitions

Operational carbon: The emissions associated with energy used to operate the building, including heating, cooling, lighting and other activities required for its operation.

Embodied carbon: Refers to the greenhouse gas emissions associated with materials and construction processes throughout the whole life cycle of a building, including raw material extraction, transportation, manufacturing, construction, deconstruction and disposal. (Ref. CBDCA)

About the Fonds immobilier de solidarité FTQ

The Fonds immobilier de solidarité FTQ drives economic growth and employment in Québec by strategically investing in profitable and socially responsible real estate projects in partnership with leading industry players. The Fonds immobilier supports projects across Québec in the residential, office, commercial, institutional and industrial sectors, in particular those that consider ESG (environmental, social, governance) factors with a view to developing sustainable properties.  As at June 30, 2024, the Fonds immobilier had 31 real estate projects in development or construction and 13.4 million square feet of development, for a combined value of $5.1 billion; 83 portfolio properties under management, including 5,404 residential rental units, and a cumulative total of $355 million invested in social and community projects. The Fonds immobilier is a member of the Canada Green Building Council — Québec division.

Groupe Devimco
Groupe Devimco is a Québec real estate development leader that stands out for the creation and execution of large real estate projects, in particular lifestyle and TOD complexes that blend commercial, business, leisure, and housing components. Combining innovation and creativity, Groupe Devimco participates in enhancing the environments it creates and the communities where they are located, for the benefit of its occupants and visitors. Devimco and Concordia University recently partnered to found the university’s Next-Generation Cities Institute.

Hydro-Québec
We have been generating, transmitting and distributing electricity for over 75 years. We do our utmost to provide you with a reliable supply of electricity and services tailored to your needs at competitive prices; while helping you consume energy wisely. By making use of clean, renewable energy sources, we contribute to Québec’s prosperity and play a central role in the emergence of a green, sustainable economy. But we want to do even more. That’s why we’re counting on the collective strength of Quebecers to help us build the energy future of our dreams.

Énergir
With more than $10 billion in assets, Énergir is a diversified energy business whose mission is to find increasingly sustainable ways to meet the energy needs of approximately 540,000 customers and the communities it serves in Québec and Vermont. It is the largest natural gas distribution company in Québec, where, by way of joint ventures, it also generates electricity from wind power. Through its subsidiaries and other investments, Énergir has a presence in the United States, where it generates electricity from hydraulic, wind and solar sources; it is also the largest electricity distributor and the sole natural gas distributor in the State of Vermont.  Énergir values energy efficiency and invests its resources and continues its efforts in innovative energy projects, such as renewable natural gas and liquefied and compressed natural gas. Through its subsidiaries, it also offers a variety of energy services. Énergir strives to become the partner of choice for those seeking a better energy future.

SOURCE Le Fonds de Solidarité des Travailleurs du Québec (FTQ)