Finance Sustainable Buildings

Build-to-rent mortgages (based on ESGs)

Type of instrument



Short term


ESG stands for environmental, social, and governance, and it refers to the three most important variables to consider when assessing the long-term viability and ethical effects of projects.

Build-to-Rent (BTR) is property development that is designed with the sole intention of appealing to the rental market as opposed to long-term home ownership.

ESG-based Build-to-Rent Mortgages seek to reward developers who include socially, environmentally and/or economically sustainable aspects in their BTR projects by offering them a lower interest rate than they would otherwise pay. The rate these developers/customers pay is adjusted as a result of them achieving the sustainability targets they agreed upon. These projects seems to have a lower risk, so more affordable conditions could be offered by banks or other institutions.

Socioeconomic impacts

Banks argue that businesses with clear ESG strategies are generally better run and less likely to default on their loans.

Companies can leverage their ESG performance to improve their bottom line and their company’s overall ESG performance through Sustainability Linked Loans (SLLs). SLLs give borrowers the opportunity to apply the loan toward general business purposes as the terms are tied solely to the borrowers ESG-related performance and not the use of proceeds or the projects financed. This flexibility has made the SLL a popular alternative to traditional capital raising and debt.

ESG framework focuses on combating climate-related disruption and social inequity but could be hard to implement due to the lack of instruments to measure real environmental goals. There is a huge possibility of impact-washing (purpose-washing), so a third party verification should be included in the equation. The idea of linking them to rental projects could provide more affordable houses for low income households as well as proving housing access to young families.

Related to

Circularity. ESG (Environmental, Social and Governance) and Circular Economy are both interconnected as all the novel sustainable ideas and innovations that investors are seeking are possible to move faster towards circular economy. Global and homogenous circular KPIs should be implemented to achieve equity in all projects.


Sufficiency. Through application of ESG mortgages, sufficiency actions like efficient use of living space, reduction of the floor area per capita could be achieved. Identified sufficiency KPIs to measure ESG performance could be m2 living space/capita, m2 of unused living space, or density capita/area. Also, there is a clear switch from ownership to usership with this approach.


Renovation Wave. These ESG-based mortgages could also achieved a one-step big renovation as the conditions for the mortgage are favourable for a lifecycle Whole Carbon approach reducing both, operational and embodied emissions.

Study Case: Build-to-rent mortgages (based on ESGs)


As part of Secured Rental Policy (SRP), the City of Vancouver recently approved policy for six-story rental housing on major streets. The streamlined policy enables the municipal government’s use of rental housing zoning — previously granted by the provincial government — to allow low- and mid-rise rental housing buildings on purely commercial districts on arterial streets.
These rental housing buildings fronting major roads can reach up to six stories, as long as at least 20% of the residential floor area is dedicated for below-market rental housing or 100% social housing. As well, six-story buildings on commercial zoning must have at least 35% of the units sized on specific living space/capita, and the structures must be designed to a Passive House green building standard or comply with other green building policies.

City staff forecast the SRP could help catalyse 4,700 secured purpose-built rental homes over 10 years — an average of 470 rental homes per year.
Canadian Banks are already offering Advantageous mortgage conditions related to this policy as substantial sustainable goals will be achieved.