ABSTRACT
There are two basic methods of financing a sustainable building and the choice of method is based upon the clients’ perception of risk and uncertainty. Those individuals with the available capital and a team of experts who are comfortable with the level of risk and uncertainty involved; will tend to opt for a so called self-financing traditional model of finance. In this example the energy-efficiency measures are paid for directly from an organisation’s or individual’s cash reserves. For those clients who (a) do not have the available capital (b) do not have expertise in this area and/or (c) are concerned over risk and uncertainty, should engage with a new method of finance using a third-party Energy Services Company (ESCO). They take ownership of the risk and uncertainty and pay for all the necessary measures to create a sustainable building. In return they are paid by the energy savings made over a given time-period. The ESCO will set up an Energy Performance Contract (EPC) with the client/building owner upon which the financial terms are agreed to the satisfaction of both parties. This new form of finance is gaining considerable traction having initially worked successfully in the US markets.
If an individual wishes to avoid any perceived risk and does not have the upfront capital, engaging with a third-party ESCO is the optimum method of financing sustainable buildings. The vast majority of building owners do not wish to self-finance sustainable buildings as they don’t see the immediate return on investment.
