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EDGE

EDGE

An innovation of IFC, EDGE (“Excellence in Design for Greater Efficiencies”) is an online platform, a green building standard and a certification system for over 140 countries. The EDGE application helps to determine the most cost-effective options for designing green within a local climate context. EDGE can be used for buildings of all vintages, including new construction, existing buildings and major retrofits.

A project that reaches the EDGE standard of 20 percent less energy use, 20 percent less water use, and 20 percent less embodied energy in materials compared to a base case building can be independently certified. The value of EDGE certification is a promotional advantage, as customers benefit from lower utility bills.

EDGE is part of a holistic strategy to steer construction in rapidly urbanizing economies onto a more low-carbon path. It’s an example of IFC’s commitment to creating markets that are competitive, sustainable, inclusive and resilient.

Green Buildings are Critical in Mitigating Climate Change

Today’s buildings generate 19 percent of energy-related GHG emissions and consume 40 percent of electricity globally. By 2050, the built environment is expected to double due to high population growth and urbanization trends. Most of this growth will occur in emerging markets, particularly in middle-income countries. To move onto a greener development path, resource-efficient building practices must be introduced and implemented. Green construction offers a chance to secure emission cuts at a low cost and lock in energy and water savings for decades.

Currently only a small volume of buildings is designed and certified as green. Government regulations are often not in place to require green building practices, and voluntary standards are complex and not widely applied. Developers and consumers are not aware of the financial benefits of resource-efficient buildings, and financing is not yet designed to support green development.

Perception vs. Reality in Green Buildings

The perception of how much a green building costs to design and build is much higher than reality, particularly given falling technology costs. The World Green Building Council’s The Business Case for Green Building showed that while the actual cost ranges from negative .5 percent to 12 percent higher, the perception is that it is from 1 percent to 30 percent higher.

Developers are reluctant to absorb the additional costs of green design when energy-saving benefits are realized by owners, who focus on immediate affordability over uncertain utility savings or long-term appreciation. Bankers fail to provide additional financing to cover extra capital costs, for fear of increasing non-payment risk, and are reluctant to establish systems to validate savings if there is an insufficient green building pipeline. Adding to this complexity is a lack of a clear definition as to what constitutes a “green building.”

Banks need data on the financial benefits of green buildings, but it is mostly missing in emerging markets. There is analysis that exists in the U.S. and Europe that indicates builders command four to nine percent higher sales prices for green homes, which sell as much as four times faster. Green homeowners save 15 to 20 percent on utility bills and resell their properties at a four to 10 percent higher value than conventionally built homes. Banks enjoy a lower default rate of up to 33 percent from green homebuyers.

The value of green buildings is particularly important in emerging markets, where utility bills can consume up to 20 percent of a moderate-income family’s disposable income, and resources such as clean energy and water are scarce. To address these issues, IFC created the Green Building Market Transformation Program. The program addresses the gap in the market for a clear green building standard and low-cost rating system that outlines the benefits to developers, owners and banks, to unblock the potential for an era of green construction and development.

A Priority for IFC and the World Bank Group

IFC’s Green Buildings Market Transformation Program helps to create a virtuous cycle of supply and demand for resource-efficient building design, construction and ownership. The aim is to set a metrics-driven definition of what constitutes a green building, reward property developers for building green, increase regulatory pull, and promote direct investment.

Find out more by clicking on any of the four areas of IFC’s strategy to promote green building growth:

Investment & Advisory for Banks
Activate financing through banking partners and support product development such as green mortgages and green bonds
Investment & Advisory for the Building Sector
Advise and directly invest in the property sector through IFC's own balance sheet
EDGE Certification
Create a scalable voluntary certification system and software to empower the property industry to build green
Green Building Codes & Incentives
Incentivize green decision-making by fostering an enabling environment of supportive government policies to raise the bar on building regulations
IFC's Green Building Market Transformation Program

Following is IFC’s strategy to promote green building growth:

  1. An enabling environment of supportive government policies that raises the bar through increasingly greener building codes. Governments can provide the right mix of incentives to the private sector and raise public awareness about the benefits of green building ownership. IFC offers expertise on government policy reform. Learn More >
  2. A metrics-driven definition through the EDGE green building standard and scalable certification system that focuses on a minimum achievement of less energy, water and embodied energy in materials. The standard is verifiable and leads to demonstrated reductions in utility costs.
  3. The identification of low-cost, high-return design options through easy-to-use software that encourages architects and engineers to choose the best design practices and solutions, combined with a fast, inexpensive certification system to verify that the standard has been met.
  4. Direct investment in IFC’s own green buildings portfolio, mobilization through its banking partners, and support for new product development such as green mortgages, green bonds and green construction financing. EDGE can be used to streamline eligibility procedures and the reporting needs of financial institutions as they move towards green investment portfolios. Learn More >
  5. A collection of evidence that building green is profitable for all parties in the ecosystem. This can best be achieved through a network of global champions and certification entities who support the verification, rewarding and collection of data for proof of concept reporting.

Engagement with Policy Makers on Green Building Codes

IFC has long-standing experience working with regulators on green building codes that are low-cost for the private sector to implement, easily enforceable, and impactful for the environment. This includes raising building efficiency standards, promoting policies to leverage private sector innovation, and providing support once codes are established. IFC has helped to develop regulations in Bangladesh, Colombia, Costa Rica, Indonesia, Panama, Peru, the Philippines and Vietnam.

Engagement with government counterparts at the city, regional and national level has led to the development of a road map for code implementation:

Preparation

  • Prior to code development, IFC prepares a cooperation agreement with the responsible government agency to designate the scope of the project along with the budget and resources required.

Development

  • IFC uses a ground-up approach that is informed by internationally accepted best practices, tempered by the local context (i.e., analysis using local climatic data, local building stock data and conducting a rigorous sensitivity analysis based on local data). Surveys on recently built buildings are used to calibrate computer models that predict the effect of energy and water efficiency measures on the consumption and cost of energy by building type. Financial feasibility for each proposed efficiency measure is evaluated based on costs sourced from the local market to establish realistic costs of implementation.
  • Stakeholder consultations are held to build consensus and once the assessment and a draft code is ready for implementation, IFC supports with recommendations on awareness raising.

Enforcement

  • After the code is launched, IFC advises on permit integration and compliance mechanisms, including both incentives and penalties. Support for adoption is provided through user guides, technical calculators and training, with pilot projects showcasing best practices.
  • Since building regulations are new to emerging markets, an intensive effort is undertaken for training and awareness-raising among the government evaluating agency, design professionals and building owners. This is accomplished through workshops, hands-on exercises, and support documentation such as user guides, checklists and online tools. Selected demonstration projects help to train evaluators, designers and owners on various aspects of code compliance.

Improvement

  • IFC takes a long-term view by assisting the government agency with code revisions to adapt to policy changes and higher aspirations over time.

IFC finds great value in engaging the public sector on codes and policies. Awareness raising by the public sector through a code initiative inevitably seeds support for beyond-code policies. When enforced, codes deliver GHG gains across a broader base of buildings than voluntary certification alone can realize.

In many emerging markets, however, the capacity is weak for code development, maintenance and enforcement. In Mexico and India, for example, compulsory green building codes have been unenforced for years. In Indonesia, Vietnam and the Philippines, IFC has learned that there is a need for high investment in capacity building for enforcement teams over extended periods of time. In response to this, IFC has diversified its approach, combining code work with voluntary certification where practical.

A Long-term Commitment to Financing Green Buildings

IFC makes direct investments in green affordable homes, hotels, shopping malls, warehouses and hospitals, and mobilizes green financing from intermediaries to support the growth of all green building typologies. IFC provides existing and new clients with investment support and advisory services intended to facilitate development of effective green buildings. IFC focuses on:

  • Investment and technical assistance for clients who wish to develop green buildings or retrofit existing buildings;
  • Assessment of developing green building investment facilities, either country or region-specific or client-specific;
  • Promotion of the benefits of greener construction technologies and materials across the supply chain.

With a cumulative investment portfolio in green buildings now close to 3 billion dollars, IFC demonstrates the potential for financial success in the sector within rapidly urbanizing markets. This encourages positive change in investment patterns where the greatest potential impact can be made. IFC’s own investments are a strong proof of concept that can help catalyze the $16 trillion investment potential for green buildings that exists between now and 2030 (see Climate Investment Opportunities in Emerging Markets).

Encouragement of Financial Innovation

Financial institutions play a leadership role in supporting the transition to a low-carbon economy by investing in green building projects and technologies while making attractive returns in the process. Through innovative new products such as green mortgages, lenders can capitalize on a nascent market segment with unlimited potential and generate attractive risk-adjusted returns resulting from a better asset risk profile and higher revenue per borrower.

IFC provides investment and advice to financial institutions to help launch a pipeline of competitive products, which each have tangible benefits for the issuing institution:

Green Construction Finance

  • potentially lower risk weighting for green real estate financing

Green Mortgages

  • increase allowable loan to value from 80% to up to 95%

Green Bonds

  • securitization of green building loans as collateralization

Home Improvement Loans

  • green housing renovation or purchase plus renovation

IFC has helped financial institutions offer green buildings investment products in Colombia, India, Kenya, the Philippines, South Africa and Turkey. IFC also provides advisory assistance on business development and strategy, credit and risk management, and training for loan officers and their clients. This includes both public and private banks as well as real estate investment companies that offer property funds and impact funds to meet the demand from responsible institutional investors for green assets.