By utilizing a finance-focused, data-driven approach, green residential construction took off in Colombia. In 2017, Colombia had only one residential building certified by LEED (Thomas et al., 2020). At that time, the national government issued tax incentives for technical solutions, such as insulation and energy-efficient air conditioning systems (Government of Colombia, 2018). The green market took off when two commercial banks, Bancolombia and Davivienda, launched green investment programs for new housing, which included adopting the International Finance Corporation’s EDGE as a common green standard, incentivized construction loans to developers, an education campaign and technical assistance for developers, partnerships for mortgages, and green mortgages (IFC, 2019).
These program components were possible on fully commercial terms, without grants or concessional finance. Bancolombia’s ability to pass through low rates was enabled by its own ability to raise cheaper financing through a green label, to capture a greater market share, and to cross-sell construction finance and green mortgages (Menes, 2019). As of February 2021, Colombia had 3.2 million square meters of certified green residential space, over half of which was in the affordable category. Colombia illustrates how the right combination of government incentives, education and technical assistance to developers, and green finance can transform housing markets.
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