As part of its Building Retrofits Initiative, the Canada Infrastructure Bank (CIB) is providing loans to Enbridge Sustain and Blackstone Energy Services. Rooftop solar system installations are part of the retrofits being done with the funding.Supplied/Enbridge Sustain and Blackstone Energy Services
A $100-million partnership between the Canada Infrastructure Bank (CIB) and Scotiabank aims to help owners retrofit small and mid-sized commercial buildings to make them more energy efficient and climate resilient, signalling a push toward upgrading Canada’s aging inventory.
The partnership, announced in June, is part of the CIB’s Building Retrofits Initiative (BRI), a federal program that makes low-cost, flexible financing available to owners and developers who want to upgrade their properties and reduce their greenhouse gas (GHG) emissions by at least 30 per cent. Other partnerships born from the BRI include one for $50-million between the CIB and Efficiency Capital, which develops, manages and invests in energy and net-zero building projects, as well as another with BMO that was quietly announced in 2023.
While it’s unclear how many building owners the BRI program will reach, the goal is to make it easier to retrofit small to mid-sized projects.
In Canada, the building sector accounts for 18 per cent of the country’s total emissions and it is the third-highest-emitting sector nationwide, behind oil-and-gas and transportation. The federal government has set a target of net-zero emissions by 2050 – a goal that will require retrofitting about 344-million square feet of commercial space, the equivalent of about 123 big-boxstores,each year, according to the Pembina Institute, an environmental think tank.
The race to retrofit Canadian buildings
Projects eligible for CIB-Scotiabank financing include commercial, industrial, office and multi-residential buildings. While the program is just starting to receive inquiries, the partners expect strong interest among small and mid-sized commercial property builders, owners and investment managers, says Charles Todd, the CIB’s managing director of investments.
“This helps reach owners of, say, 10- or 15-storey buildings who want to switch from natural gas to electric heating and cooling.”
Other eligible projects include those looking to complete building envelope improvements, automation and fuel-switching changes, lighting and electrical system upgrades, and electric vehicle (EV) charging infrastructure installation.
There are about 482,000 commercial and public buildings in Canada – most of which will require some sustainability retrofits before 2050, according to Natural Resources Canada.
“We’ve already had considerable success with loans for larger firms such as KingSett Capital and CAPREIT [Canadian Apartment Properties Real Estate Investment Trust], who have borrowed to retrofit major property portfolios,” Mr. Todd says.
For example, the CIB lent $38-million to help KingSett retrofit Toronto’s iconic Fairmont Royal York hotel in 2023. The hotel’s retrofits connected the building to Toronto’s deep lake water cooling system and installed an electric heat pump plant, helping to earn the building net-zero certification from the Canada Green Building Council.
“Now we’re looking to work with owners who may need $5-million or $10-million in financing to retrofit, rather than $50-million for a skyscraper or a major hotel,” Mr. Todd explains.
Under the BRI, the CIB is investing $50-million to retrofit the University of Toronto’s St. George Campus. Some of these retrofits include replacing gas-fueled sources with electricity, installing industrial heat pumps and upgrading building automation systems.Supplied/Canada Infrastructure Bank
Reaching new building owners
Partnering with a commercial bank helps the CIB, a Crown corporation, reach Scotiabank clients that may not know about or be used to accessing publicly funded programs or sources. “Scotiabank is leading the marketing, and even after a few weeks, we’re seeing a lot of interest in the program from its clients,” Mr. Todd says.
Making buildings more energy-efficient and resilient is not just good for the planet, it can help owners save on long-term expenses, says Christopher Manning, Scotiabank’s executive vice-president of Canadian commercial banking. This is supported by data from Natural Resources Canada, which estimates that deep retrofits can save up to 60 per cent in energy costs.
“Retrofitting is a good investment to upgrade existing buildings rather than having to tear them down and start from scratch,” Mr. Manning says. “It’s a way to give buildings staying power so they’re still cost-effective to operate, lease and work in for decades.”
The CIB-Scotiabank program works on a sliding scale – each building must show how it’s going to reduce its emissions by 30 per cent to get a favourable, low-interest rate on its loan. Rates improve if a project can reduce its GHGs even further, Mr. Todd says.
Forging ahead amid U.S. uncertainty
Both Mr. Todd and Mr. Manning acknowledge the new retrofit partnership comes amid U.S. rollbacks for the types of sustainability initiatives that qualify for financing under the program, such as building retrofits, clean electricity upgrades and EV charger installations.
“We’re aware, of course, but demand for retrofitting is driven by a number of factors,” Mr. Manning says. “Tenants want buildings that are more efficient; owners want lower heating and energy costs. We take our cue from our clients.”
Benjamin Shinewald, president and CEO of BOMA Canada, an umbrella group of building owners and operators, expresses a similar position.
“Commercial building retrofits are high on our agenda, and for good reason,” he says. “Buildings that perform better in sustainability and energy efficiency command better rents and drive higher asset values. Retrofitting can mean the building will spend less money and produce less carbon at the same time. And retrofitting makes buildings more resilient to climate change, reducing downtime and damage from extreme weather.”
Getting the financing right
While the new CIB-Scotiabank partnership fills an important need, its success will depend on the details, says Francisca Quinn, founder and president of Quinn+Partners, a Toronto-based sustainability consultancy.
Last year, Ms. Quinn and her husband, Mike Quinn, retrofitted two historic row houses in Toronto’s Yorkville neighbourhood and found there were complexities involved in accessing favourable financing.
“The program looks great on paper. The interest rates are lower than any regular bank financing,” Ms. Quinn says. “But loans like this typically require extensive measurement and verification, which can cost smaller owners as much as they would save on interest.”
Another challenge for smaller buildings is that owners often need to expand the structure to make energy- and carbon-saving measures cost-efficient. “This can make them ineligible for retrofit loans,” Ms. Quinn says. “The challenge is to design the lending program so it works for the thousands of commercial buildings, where the only way they can retrofit extensively is to densify or add on.”
Getting it right is important, Mr. Shinewald adds. The hope is that programs such as the CIB-Scotiabank partnership will make it easier to retrofit small and mid-sized buildings, he says.
“The vast majority of buildings in Canada are not the shiniest towers – and this huge bulk of buildings must be part of the solution, too.”