J une 15, 2006 A short presentation by Vancity’s Dan Paris and Detlef Beck Gaining Ground Summit: Financing 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?

 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?

Residential 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 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 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 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 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 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 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 & 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 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