Green the Urban Concrete Jungle? A Sustainable Construction Proposal
Prasad Rao, MTech PhD PennState
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Construction – both Residential and Commercial, is a primary economic sector worldwide that, beyond adding to the Nation’s GDP, contributes to societal growth, adds value to Businesses, and generates employment. Despite those credentials, the Construction Sector bears the burden of contributing to significant environmental externalities across the spectrum of its inputs, construction-associated pollution, and demolition waste. Construction figures prominently in Climate-change debate and policy priorities for reasons its share in the economic pie, and the externality-intensiveness of income-incremented upgrades to Property assets. In response, Governments worldwide have adopted the ‘Green Building Code’[1] to incentivize Property Builders and Developers to increment environmental sustainability of their operations. While such Code is legislated and incentivized with Budgetary subvention of Sector funds and Buyer loans, it is worthwhile to explore an FV financial mechanism that obtains an alternate, if not a superior, more comprehensive and efficient route to Sustainability in the Construction Sector.
This AltKuznets proposed design fast-forwards Sustainable Construction through the Financial markets by conceiving an over-arching Galactic-Global-Sovereign-Precinct Authority, the GBPCC, with powers to monetize a Fund Source on its liened Gold Collateral, and administer a Schumpeterian for Cause-advantaged and -disadvantaged Sectors and Businesses. Administration of the Cause by the GBPCC is facilitated by the issue of Collateral Mirror PV Bonds that are monetizable in to lines, keys and GETFs consistent with intended outcomes. The GBPCC in association with Realty Mutual funds offers Precinct-entering Households, and those tying the knot, a membership toward an eventual, if publicly competed issue of a ‘Next Green LQ Asset Offer’. Members are required to affirm their allegiance to the Sustainable Construction Cause by subscribing to an SIP attached to a Realty Mutual Fund. The FV-Lien nature of the scheme facilitates prospective Households to lean on the underlying GBPCC Collateral to verify their long futures around the ‘Green Next LQ Offer’, and adjust their life-plans. The GBPCC Authority stimulates both Supply of, and Demand for Sustainable Construction, or Green Buildings and funds various entities to meet its goals. It underwrites, on one hand, Realty Mutual Funds and Realtors/Builders/Property Developers, and on the other Construction R&D, and suppliers of Conventional and Advanced Materials.
Household Investors and Scheme Members, who are credited ‘Sustainable Green Asset Credits’ for their SIP investments, are benefited by a two-fold leverage on their Sustainable Asset Credits – one that rewards them for a high Financial Credit Score, and other for their active participation in an Initiative that issues HCEC Credits[2] through a Lifetime Card for their Sustainable Consumption expenditures. Since Consumption is integral to purchase and Household use of a residence, the inclusion of the HCEC in to the ranking criterion for the Green LQ Offer further incentivizes those sustainable to the future generations and the future world. The design optionally provides for a Credit Stake-based ‘Social Diligence Challenge Mechanism’ to address Social Equity concerns prior the rank-based issue of the Sustainability-upgraded LQ Asset. This multi-step process reinforces the primacy of Social Diligence, re-arranges the Rank of mutual-fund sponsored hopefuls, and ensures only those Investors-Participants who have good Credit Score, HCEC Scores and Social Diligence are fast-forwarded toward their ‘Next LQ Offers’.
Under the proposed design, the Realty Mutual Fund would sponsor a variable number of high-scoring, high-ranked Participants to its associated Realty Platform. In turn, the Realty Platform would apply the twice-leveraged and socially-challenged Sustainable Asset Credits to offer Households a ‘Next LQ Upgrade’ in the form of Residential assets conforming to the ‘Green Building Code’. Concomitantly, the GBPCC would insist upon, monitor, compile and update the Sustainability record of Construction firms, and compute a ‘Builder Cumulative Sustainability Score’ that encompassed the sustainability of its past and current projects. It’d. thereafter, financially enforce a PE ZS that upgraded Sustainability-complaint listed Construction firms from those non-conforming. Incentivized with both, an upward shift in the demand for Sustainable residences from Member Participants, and a PE-Upgrade tied to their Sustainability credentials, Builders and Property Developers would design, source, construct and offer Green Buildings to the Realty market in preference to conventional structures. Such Green Sustainable Buildings would be characterized by use of advanced sustainable materials and pro-active internalization of externalities associated with input use and construction wastes – factors that would count toward their Project-specific Sustainability Score.
The Design has many attractive features that increase the likelihood of its success. The Schumpeterian obtains from the confluence of intents of the NGDP Cause Bond and the Global Innovation Cause Bond. The Technology Schumpeterian FV monetizes two ways: 1) as Sovereign-monetized Prudence Key to fund local R&D, & as RoW-Auerbach-monetized Schumpeterian PV to fund and incentivize Advanced Materials, and 2) as a Schumpeterian End stream offered to local Aggregate/Commodity businesses that seek to close down. These monetizes incentivize advances, particularly in Advanced Materials, but otherwise offer a Sundown monetize to conventional Construction aggregates and Commodities businesses. The design outlines a quantitative model that traces Monetization and allocations on one hand, Builder Credentials on the other and Participant Credit, and Rank on yet another.
The success of the design presented here hinges upon the extent to which large Sovereign Bond Funds, Central Bank-associated Institutional Equity Funds, and Pension Funds dovetail with Sustainability Finance and Investing for the Construction Sector. The design anticipates the lack of incentives that might characterize Institutional Investors in altering their investment rationale, and offers a simple if ingenious strategy to ensure conformance with PE incentivization of the Sustainable Construction Cause. It is voluntary to both Householders and Construction firms, and flexible in the sense, Householders may prefer the Realty Mutual Fund (and the associated Realty Platform) appropriate to their social and financial niche, and which offer attractive Lien Maturity, and transparent administration. Builders and Property Developers who consciously conform with Sustainable Construction practices and cumulate higher scores, and who offer Green-scored Sustainable Building Projects are preferred by Member-Participants seeking to exchange their ‘Green Asset Credits FV’ for ‘Green Assets PV’ through their Realty Platform. Although incentivizing of Construction Projects with high Green Building Coefficient, GBC, the design does not impinge upon the freedoms, decisions and choices of construction firms. Under the Design, Construction entities are free to pick the location, size, plans and timings of their projects, albeit as moderated by GBPCC incentives and prospective Consumers with the expectation those projects would command a shadow price calibrated to their GBC. The Strategy offers Schumpeterian lines to fund Innovation, Equities of Advanced Materials, and Sundown Monetizes to out-of-favor aggregates and construction materials, thus fast-forwarding an upstream Green revolution as well.
The AltKuz Design abstracted here focusses on achieving its cause by incentivizing Household demand for Green Buildings, Household Supply of Green Buildings, and Investor interest in Green Realty stocks. The design offers significant long-run Investor returns for a life-long commitment to the Sustainable Construction Cause. The insistence on a) Credit Scores, b) participation in the HCEC Lifetime Card Scheme, and c) a Social Diligence Challenge, together ensure those sponsored by the Realty Mutual Fund, and those who make it to the final pool are entirely worthy and deserving of their ‘Next Asset LQ’ Offers.
The stimulation of Demand for, and Supply of Green Residences, concomitant with the issue of FV keys to Construction and Advanced Materials, the 3-step ‘Credit Score-HCEC-Social Diligence Challenge’ calibrated criterion, fast-forward the Sustainable Construction Cause, and obtain a Government-overseen, market-tuned, formulaically-quantified design that is transparent, efficient, and verifiable.
AltKuznets invites interest in quantitatively modelling and
simulating this Draft conception, prior implementation at Client site.
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