17 January 2019
Green warehouses – which use a variety of climate-friendly approaches to reduce energy use and waste – are set to play a very significant role in both the greening of Asia's building and also in green finance. For warehouses, going green can significantly reduce the running costs of a warehouse facility, while also having ecological benefits. Over the medium-term, it's possible that the flat roofs of warehouses and industrial buildings will be generating a significant percentage of a country's electricity through solar panels. Securitization of green bank loans originally used to finance warehouse projects could also take hold, as it has in the US market.
Green warehouse boom
Energy costs for warehouse operation are high – they can account for 10% of a company's revenue. Within energy costs, lighting can be the biggest chunk in some regions, sometimes accounting for as much as 80% of the total energy bill. Specialist warehouses – such as those with refrigeration for food or cooling for computer servers – can have particularly high energy bills.
Green warehouses are springing up all over China, where internet shopping has driven the need for both storage and data centres. One prominent example is Nike, which built the first LEED platinum warehouse in China in 2011 – LEED is the Leadership in Energy and Environmental Design certification of the US Green Building Council. The warehouse was projected to save 4,400,000 kilowatts of electricity annually through the use of efficient lighting, an on-site solar heating system, and plentiful access to natural light, along with other green features. The impact of all of these green approaches is to reduce CO2 emissions by 4,200 tons annually.
Warehouse companies such as Prologis, GLP and e-Shang Redwood are either retrofitting existing warehouses or are building new green warehouses in this way. "Green warehouses are leading the green building market, in terms of the way they operate," says Pierre Rousseau, senior strategic advisor sustainable business at BNP Paribas. In China, "many property companies running warehousing are ahead of industry in terms of energy efficiency, mobility access, the use of solar panels, the way they generate heating and cooling, and other factors. They are very well advanced."
The IFC's EDGE program helps companies understand the benefits of going green for warehouses. "The need for modern warehousing is increasing due to the development of e-commerce," says Jean-Marie Masse, chief investment officer at the IFC in Washington DC. "These flat-roofed warehousing facilities can be built with roof-top solar panels, which enable the production of energy, and even potentially the contribution of energy to the electricity grid."
The IFC's range of EDGE solutions1 helps companies model how construction factors such as building orientation, materials, and energy efficient lighting can help reduce costs and climate change impact. EDGE can also help companies explore the benefits of solar panels on flat warehouse roofs – a very exciting opportunity to engage with renewable energy for companies that can also lower energy bills.
The IFC is working with a number of Asian companies on green warehouse projects. For example, Thailand's TICON Logistics Park Co., Ltd (TPARK), a subsidiary of TICON Industrial Connection Plc., recently achieved a preliminary EDGE certificate for their Bangplee 4 project, a warehouse in Bangkok with over 25,000 square meters of space.
"Green building is on an upward trend with obvious growing interests in green building investments by the business sector," said Sopon Racharaksa, President of TICON. "The number of projects seeking green building certification keeps rising in Thailand and across ASEAN markets."
The TPARK Bangplee 4 facility was designed according to the IFC's EDGE standards, which calls for the use of eco-friendly materials as well as the reduction of energy and water consumption by at least 20%. TPARK Bangplee 4 will also have lower greenhouse-gas emissions than a traditional warehouse, reducing its environmental footprint.
Financing green warehouses
At the moment, most of the financing of green warehouses is through either the organisation's cash flow or else through green bank loans in Asia. Often, as in China, these green loans receive certain benefits that are targeted both at the banks and at the companies, including special funding costs.
Green loans are plentiful in China – and are being used to finance green projects apart from warehousing – but this market is just getting off the ground elsewhere in Asia. For example, the first syndicated, secured green loan in South East Asia was raised in September 2018, raising SGD1.2 billion ($900 million) to help fund to help fund the construction of a 38-storey office and retail development in Singapore that has received a Platinum Award under the Singapore Building and Construction Authority Green Mark.2
For a variety of reasons, green bonds have not been used to finance these green warehouse projects outside of China, yet. However, "it will come," says Rousseau. One green financing option that could be used is securitization. In the US, securitization has been used for some time to package up a number of green warehouse or industrial properties, for refinancing. "Green securitization will be the future. It is already well established in the US, it is almost natural." Rousseau adds, "Asia will be one of the largest regions where you will see securitization. The banking system simply isn't sufficient enough to finance everything that will be required."
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