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Building resilience comes at a higher initial cost. How can we better finance it?

April 4, 2022 por Livia Minoja - Carlos Henriquez Cortez - Christiaan Gischler Leave a Comment


The economic impact of climate events in the Caribbean is among the highest in the world. Improving the resilience of buildings is vital to increase preparedness to the impacts of climate change and is economically viable for many building typologies in high-risk Caribbean countries.

Although resilient buildings generate long-term savings, in most cases, they come with higher upfront construction costs, compared to standard infrastructure, as shown in the graphic below.

What kind of subsidized financing works best to mitigate the initial higher costs and incentivize resilient building construction?

The third publication from the “Building a More Resilient and Low Carbon Caribbean” series analyzed the benefits of subsidized financing for resilient buildings in the Caribbean, exploring how low-cost financial subsidies could reduce the initial cost for more resilient buildings and incentivize developers and building owners to invest in more resilient constructions.

The three options analyzed included financial subsidies to project developers (in the form of subsidized construction loans), to building owners (in the form of subsidized mortgages), or both, always assuming that all cost reductions from subsidizing the developer’s financing are passed on to the building owner through a lower purchase price and do not enhance the developer’s return on investment.

The report investigated the impact of these three financial subsidy options on a building’s purchase cost and total lifetime ownership cost for eight building categories (stand-alone house, stand-alone social house, apartment building, social housing apartment building, hotel, hospital, outpatient clinic, and school), six building construction archetypes (wood, enhanced wood, concrete block, enhanced concrete block, in-situ concrete, and enhanced in-situ concrete), and the two green concrete alternatives (pre-cast resin aggregate [PRA] concrete and coconut fiber concrete). 

The analysis compared each combination of building category, construction archetype, and financial subsidy to a “business as usual” (BAU) case with standard construction and standard financial terms for both the project developer and the building owner.

The results show that providing subsidized finance to the project developer reduces the building purchase price below that of the BAU option for most of the analyzed resilient building options.  Providing subsidized finance to the building owner would reduce the effective purchase price even further. Providing subsidized finance to both the developer and the building owner resulted in the greatest discount relative to the BAU cases, but did not provide a discount that was significantly greater than that of the subsidized owner finance alone.

This high-level result suggests that providing subsidized financing to the building owner may be the most effective way to incentivize resilient construction practices.


Would you like to know more? Download our latest publication Report 3: Impact of Subsidized Financing to Support Resilient Buildings in the Caribbean and stay tuned for the next posts!


Filed Under: Climate change, Infrastructure and Sustainable Landscapes

Livia Minoja

Livia es Especialista en Infraestructura Social en el BID, donde trabaja en la preparación y ejecución de programas que incluyen el diseño y construcción de proyectos de infraestructura social, en varios países de la región, como Belice, Costa Rica, Perú, República Dominicana, Surinam, entre otros. Se interesa en temas de innovación, sostenibilidad y eficiencia energética en los diseños, y en la sistematización de buenas prácticas en la mejora de los procesos de ejecución de los programas. Anteriormente, Livia trabajó en la División de Desarrollo Urbano y Vivienda del BID, centrándose en la revitalización de los centros históricos; en ONU-Hábitat en México, como consultora para el desarrollo de lineamientos de diseño para refugios para mujeres víctimas de violencia; en la Agencia de las Naciones Unidas para los Refugiados de Palestina (UNRWA), como arquitecta en programa de desarrollo urbano para los campos de refugiados de Cisjordania. También se desempeñó en estudios de arquitectura y departamentos de investigación en Brasil e Italia, centrándose principalmente en proyectos de desarrollo urbano en zonas marginadas. Adicionalmente, ha sido Profesora en la Facultad de Arquitectura de la Universidad Iberoamericana de la Ciudad de México y en la Facultad de Estudios Urbanos de la Universidad de Al-Quds de Jerusalén. Livia tiene un Maestría en Arquitectura por el Politécnico de Milán.

Carlos Henriquez Cortez

Carlos is a consultant on social infrastructure for the IDB's Infrastructure and Energy Sector (INE) since 2019. As a member of the Social Infrastructure Unit (SIU), he has worked in supporting the preparation and implementation of the Social Sector programmes in several countries in the region, such as Guatemala, Bahamas, Jamaica, Haiti and Honduras, among others. He specializes in hospital infrastructure and sustainable architecture. In addition, he is currently working on resilience and disaster risk management. Carlos is a construction professional with more than 20 years of experience. Previously, he was a member of the NGO Médecins Sans Frontières (MSF) for 12 years, where he worked in countries such as Angola, Congo, Chad, South Sudan, Haiti and Afghanistan among others and also in MSF's headquarter in Brussels. During this period, he was in charge of different hospital infrastructure projects and participated in the conception, development and implementation of an innovative programme of modular and prefabricated structures pioneered by MSF. Carlos is a construction engineer and holds a master's degree in sustainable architecture from the Polytechnic University of Catalonia. Before joining the international cooperation he owned his own construction company in Chile, his home country.

Christiaan Gischler

Christiaan Gischler, Lead Energy Specialist, Inter-American Development Bank (IDB) Mr. Gischler is the focal point for sustainable energy within the Inter-American Development Bank (IDB), with over 15 years of experience in the energy and environmental sector in Latin American and the Caribbean (LAC). Currently, he is leading several initiatives in renewable energy including geothermal power, energy efficiency, bioenergy and climate change mitigation. Mr. Gischler is actively working and promoting sustainable energy projects and programs throughout LAC. Mr. Gischler has developed several co-financing instruments with several donors using climate financing such as the Global Environment Facility (GEF), Clean Technology Fund (CTF) and more recently with the Green Climate fund (GCF) in climate change mitigation, for energy projects in the LAC. He is the practice leader for Geothermal Power and for the Caribbean region in the IDB Energy Division. Mr. Gischler has designed, developed and executed projects and financial initiatives for over US$ 3.7 billion promoting sustainable energy in LAC. He has also participated in several conferences, promoting sustainable energy as well as policy & regulation to promote renewable energies, energy efficiency and carbon emission reductions. Prior to joining the IDB, Mr. Gischler worked for National Commission for Environment in Chile and for the private sector in air pollution control equipment, reuse of waste and energy efficiency. He has taught courses in environmental engineering in Chile and Sweden. Mr. Gischler holds two Engineering degrees in chemical engineering and biotechnological engineering from the University of Chile and a Masters in Science degree in environmental engineering and sustainable infrastructure from the Royal Institute of Technology of Sweden.

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This blog is a space to reflect about the challenges, opportunities and the progress made by Latin American and Caribbean countries on the path towards the region’s sustainable development.

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