June 15, 2006A short presentation by Vancity’sDan Paris and Detlef Beck

Gaining Ground Summit:Financing Sustainable Development

Appetite for sustainable development?Appetite for sustainable development?

Sustainable development is a relatively new movement.

Financial institutions typically lag far behind industry to adopt and adapt to new movements.

Sustainability is arguably the fastest growing sector within the design & construction industries.

Financial institutions are starting to take notice • Some lenders: starting to provide new products & services;• Vancity: leader in sustainable financing for 10 years.

Vancity is Canada’s largest credit union with over $10.5 Billion in assets, 330,000 members and 47 branches.

The Vancity Group is committed to corporate social responsibility, and to helping members and communities thrive and prosper. The Group includes:

Who is Vancity?Who is Vancity?

We are a democratic, ethical and innovative provider of financial services to our members and communities.

We serve as a catalyst for the self-reliance and economic well-being of our membership and community.

We conduct business on a triple-bottom-line basis: • People, planet & profits are equally important;• We want to demonstrate & encourage members &

communities how to be profitable and care for people and the planet.

What have we become?What have we become?

Residential Financing ProgramsResidential Financing Programs

Bright Ideas Green Home Incentives• Bright idea loan: finance retrofits at Prime + 0%• Bright Idea Cashback: $170 per member• Save 10% on CMHC mortgage insurance

Clean Air Auto Loan• Prime + 0%• Save up to $3,000 in interest & $1,500 in gas over 5 yrs• Reduce 6,000 kg CO2 over 5 yrs

Green Building Grant: Real Estate Fndn BC & Vancity

Vancity EnviroVISA: support local environ’l projects

Commercial Financing ProgramsCommercial Financing Programs

Residential programs are essential to help sustainability become mainstream, but the majority of financing opportunities will be for commercial projects.

Commercial financiers are rapidly growing their equity and debt financing portfolios:

• Insurance companies: equity

• Credit Unions & Banks: debt

Commercial Financing ProgramsCommercial Financing Programs

General lenders will focus on conventional green projects.

Innovative lenders will fund unique & difficult green projects.

Several years ago, what used to be unique & difficult is now conventional.

Example: Brownfield DevelopmentExample: Brownfield Development

15 Years Ago• Brownfield development was not funded by lenders;

• Owners put up 100% of remediation & approval costs;

• Lenders required COC from Ministry of Environment to issue finance commitment.

10 Years Ago• Innovative lenders advanced remediation costs in Tranche “A”, but

required COC from MOE before advancing Tranche “B”.

5 Years Ago• Remediation is now standard part of conventional construction loan

with relatively few restrictions and no separate tranches.

Conventional Green FinancingConventional Green Financing

Conventional green loans ignore energy savings and insist on covering extra green costs with higher revenues.

Lenders typically impose several conditions:

• Approved AIP from Ministry of Environment;

• Fixed price contract

• Loan-to-value ratio: 50% - 55%

Innovative Green FinancingInnovative Green Financing

Innovative green loans accept that energy savings will result in lower operating costs, which increases the debt-coverage ratio.

Innovative green loans also accept that new technology, systems & processes will be involved, such as biomass co-generation systems.

Examples: Innovative FinancingExamples: Innovative Financing

Geothermal Heating & Cooling Systems

Independent Power Producers (IPP)• “Run-of-river” micro-hydro power production systems.• Diesel fuel electric power production for isolated

communities.

Biomass Cogeneration: waste wood, methane gas…• Supplements heat and power needs on industrial sites.• Starting to become possible for small scale communities.

New Advances & OpportunitiesNew Advances & Opportunities

Currently Available• Innovative green loans are currently tied to specific assets that

result in energy savings;• Energy savings are greater than month repayment costs

New Loan Products Under Development• New innovative green loans will not be tied to specific assets;• Loan will be tied to all building systems that will result in net energy

savings;

Utility Costs• As utility costs rise, so will energy savings• Energy efficient buildings result in lower operating costs, making

green loans more economic.

Future ChallengesFuture Challenges

Legislative changes may be required to enable federal agencies to ease loan-to-value restrictions on green loans.

Learning curve & lag time for lenders;

Site-wide financing is more difficult; few lenders have capacity or appetite for large risks associated with large projects with complex site infrastructure & interconnected systems.

On behalf of all of us at Vancity,

we wish to thank you