Financing opportunities for building retrofits are growing

There are many reasons to retrofit your building, including enhanced returns, operational improvements, risk management, and regulatory compliance, such as for Toronto’s upcoming Building Emissions Performance Standards, but it can be tough to know where to start. Access to financing is a common barrier, which is why BOMA Toronto recently brought together representatives from a diverse group of financial organizations to explain the available financing, tax credits, and benefits. We’ve compiled advice from these experts to help you navigate what’s best for your project. 

Through their Building Retrofits Initiative, Canada Infrastructure Bank (CIB) supports projects whose costs total more than $100 million through three streams: direct investment, financial institution partnership, and as a service provider partner. Projects must target at least 30% GHG reduction and include building performance energy conservation measures like HVAC and envelope upgrades.  

“We are making these investments to gain the returns of GHG reduction, accelerating the market transformation, and supporting economic and social co-benefits.” – Charles Todd, Managing Director, Investments (and Sector Lead of the Building Retrofits Initiative), Canada Infrastructure Bank 

BMO has partnered with CIB to offer their Retrofit Program as a blended finance model, offering short-term, low-cost financing. For projects targeting at least 50% decarbonization, BMO offers a demand construction loan with a 2% interest rate that funds up to 100% of eligible hard or soft costs that reduce GHG emissions or conserve resources.  

“The aim with this structure is to try and ensure that wherever possible, the energy savings pay for themselves, because the interest rate is either cheap or the costs are spread out over a long period of time.” – James Burrow, Director, Sustainable Finance, BMO 

SOFIAC: The Energy Savings Pay 

SOFIAC’s Energy Savings Pay (ESP) program supports deep energy retrofits without impacting debt limits. They offer technically and financially risk-free, turnkey projects, repaid only through a share of the savings generated, typically over a 15-year contract period. This program is available to projects with a minimum cost of $3 million, and building owners can combine multiple facilities in their portfolio to meet the required minimum.  

“We’re hitting all the solutions you need: eliminating project risk by making sure the project works properly (if it doesn’t, you don’t pay), positive cash flow from the start, supporting anchor tenants, multiple tenants and common areas, a long-term investment with no impact on your borrowing capacity, and turnkey projects.” – Ashley Jones, Development Director, SOFIAC 

Efficiency Capital: Energy-as-a-Service 

Efficiency Capital (incubated by TAF) is a “one-stop-shop” to provide Energy-as-a-Service, acting as an investor, developer, and owner of energy efficiency projects. There is no upfront capital required, and repayment of the investment is contingent on performance and reduction in operating costs.  

“By providing 100% of the upfront capital that’s required for energy efficiency projects, we shift the technical, performance, and financial risk away from the building owner onto us, and that gives building owners confidence in their retrofit projects.” – Beata Domanska, Senior Director, Projects & Asset Management, Efficiency Capital 

Federal Tax Credits 

While there’s some uncertainty regarding federal initiatives at the moment due to the prorogued government and potentially impending federal election, there are a number of tax incentives that can be implemented to support retrofit projects. Of note to building owners should be the Clean Technology credit, which acts as a tax rebate ranging between 20-30% on items including heat pumps, geothermal energy property, and solar panels. This credit is retroactive to March 28, 2023, but has an 18-month deadline for claiming credits, so act quickly.  

Securing upfront capital for retrofits is a challenge, but there are many solutions that might be right for your project. With a variety of project cost minimums and repayment structures, as well as the additional tax incentives, it’s worth getting in touch to learn more about what’s available to you. In addition to these project funding options, TAF’s Retrofit Accelerator program can offer technical and financial guidance through the process, and fund soft project costs like enhanced reserve fund studies, measurement and verification, social contracting, and more.  

Thanks to BOMA Toronto for bringing together these experts and helping to push forward building retrofit projects across the city.