Lifecycle economic feasibility assessment model for green finance in green building in Ghana

Abstract

Green building (GB) promotes sustainability in the buildings and construction sector. However, high upfront costs and inadequate financing impede adoption and implementation. In addition, several untapped opportunities exist for green finance (GF) in GB (GF-in-GB), making it highly under-invested. Besides, it lacks the necessary research and development, particularly in developing countries. Therefore, this study aimed to explore the dynamism of GF-in-GB projects in developing regions using Ghana to aid the development of a cost-benefit analysis (CBA) model to evaluate the economic feasibility of GF-in-GB projects. Accordingly, five objectives were established: (i) to evaluate the interactions between the critical drivers of GF-in-GB, (ii) to investigate the interrelationships between the critical barriers to GF-in-GB, (iii) to develop a risk assessment model for GF-in-GB, (iv) to assess the interdependencies of the strategies that can be adopted to promote GF-in-GB, and (v) to develop a CBA model to evaluate the economic feasibility of GF-in-GB projects. To achieve the aim and objectives, this research employed diverse methodological tools and techniques, including linguistic evaluation questionnaire surveys, the fuzzy Delphi method (FDM), the fuzzy decision-making trial and evaluation laboratory (FDEMATEL) method, the net present value method, internal rate of return, and scenario analysis. Data were gathered from relevant literature, and experts were identified using non-probabilistic sampling techniques. Based on the FDM and FDEMATEL results, cause-effect diagrams showing the interrelationship between the different factors of GF-in-GB in terms of the drivers, barriers, risk factors, and strategies were revealed and prioritised. The interrelationships between the factors were used to develop structural interdependence models, showing the cause-effect and influential parameters. Causal-effect frameworks can assist GF-in-GB actors and policymakers in prioritising and paying more attention to cause-group drivers, barriers, risk factors, and strategies amidst constrained resources. These cause-group factors, also known as driving and critical factors, directly impact the GF-in-GB system and demand high priority. Prioritising cause-group factors will directly impact the effect group, leading to positive results. For the GB CBA, evolving results from emerging and developing economies demonstrate that GB requires less than 6% extra cost but offers over 37% energy and water cost savings in the lifecycle. The LCC budgets of GB and GB under renewable resource (GB-RE) considerations per square meter were 36% and 74% lower than those of non-GBs, respectively. The cost-benefit ratio of GB was 1.31, indicating that the benefits outweigh the building’s costs and are expected to deliver a positive return on investment. The NPV of GB benefits over the project lifecycle was US$ 42.70/m2. GB-RE increased the cost-benefit ratio to 1.44 and NPV to US$ 97.21/m2. Subsequently, the NPV results formed the basis for developing an economic feasibility assessment model for GF-in-GB. The findings reveal that lower financing risks can make the NPV of a project more profitable, thereby making the NPV positive over a shorter horizon. The results show that the optimal weight for bank loans for the GB project was approximately 42%. This means using more green bonds (58%) in GB projects is essential and profitable. Sensitivity and risk analyses proved the accuracy of the results and the robustness of the study. This study makes valuable contributions to the GB and GF literature, especially for developing countries, but also helps policymakers, practitioners, advocates, academics, and other stakeholders promote GF-in-GB in the buildings and construction sector.