C-PACE financing continues to exponentially expand as a core component of the commercial real estate capital stack and as a method of lowering the carbon footprint of commercial infrastructure. Among C-PACE eligible measures, a new category is gaining traction: embodied carbon. Hoping to accelerate office conversions, C-PACE may now be used to finance the acquisition of a property undergoing adaptive reuse as well as finance low-embodied carbon materials in all properties.
Embodied carbon refers to emissions generated during the production, transportation, and installation of building materials. These emissions are effectively “baked in” at the time of construction and the Embodied Carbon Intensity (ECI) of a building is generally impacted by the structural elements of building, previously not eligible for C-PACE in many states. With the addition of embodied carbon reduction as a C-PACE eligible measure, foundations, footings and building enclosure elements may now be financed in addition to the mechanical, electrical, and plumbing systems.
Expanding Eligibility and Opportunity
As jurisdictions across the country evaluate program updates, embodied carbon is increasingly being recognized as an eligible measure alongside traditional energy efficiency and resiliency measures. Colorado became the first state to authorize embodied carbon as C-PACE eligible to help the state achieve its net zero emissions goal by 2050. In a first for the C-PACE industry, New York City has expanded its guidelines so that embodied carbon measures are C-PACE eligible. The city hopes to accelerate adaptive reuse projects by allowing C-PACE to finance the purchase or value of a building saved from demolition, such as office to multifamily conversions, by the percentage of carbon reduction achieved.
A Growing Opportunity in the Capital Stack
The inclusion of the value of the building being converted as a C-PACE eligible for financing unlocks incredible opportunities for acquisition financing that have never been seen before in the C-PACE industry. The record office vacancy rates and oversupply are leading to massive demand for office conversions. However, office conversions are expensive and often financially infeasible with costs that can exceed that of new construction.
Accounting for embodied carbon now allows for low-cost C-PACE capital to better align with the value of the building being preserved. By avoiding the demolition of vacant buildings and subsequent new construction, municipalities align C-PACE financing with their decarbonization goals and reward developers to help make these conversions economically viable.
For property owners, developers, and brokers, this evolution creates a meaningful opportunity to unlock additional proceeds, enhance project economics, reduce carbon footprints, and differentiate deals in a competitive market. Real estate investors and developers will have the ability to finance a broader range of construction inputs through C-PACE and avoid the need for additional equity or expensive mezzanine debt financing. For brokers, this creates new opportunities to structure more competitive deals and to bring creative capital solutions to clients.
C-PACE has already established itself as a reliable source of long-term, fixed-rate capital that can reduce a project’s weighted average cost of capital and increase leverage without diluting equity. The addition of embodied carbon measures builds on that value proposition with expanded possibilities providing significant benefits for municipalities, developers, and the environment.
Unlocking Additional Proceeds
For ground-up construction and major redevelopment projects, embodied carbon strategies can represent a significant portion of total project costs. When structured properly, these components can translate into meaningful additional C-PACE proceeds.
That means:
- Higher leverage without increasing senior debt
- Reduced equity requirements
- Improved returns and deal feasibility
In many cases, projects already incorporating sustainable materials or adaptive reuse strategies may qualify without requiring fundamental changes to design or scope. Progressive building codes mean that many projects that are permitted to existing code will already meet C-PACE eligibility criteria for embodied carbon, as is already the case with other C-PACE eligible measures.
Measures to Reduce Embodied Carbon
For reducing embodied carbon levels, mass timber, sustainable steel and low-carbon concrete have emerged as primary measures that when incorporated into building projects often lower that overall cost of construction and emissions throughout the buildings life-cycle.
Sustainable steel and low carbon concrete both aim to minimize the usage of fossil fuels during the manufacturing process and utilize a high percentage of recycled content during production or carbon capture to reduce emissions. Both the steel and concrete industries are shifting towards more sustainable materials and procedures, with most U.S. steel makers having Environmental Product Declarations (EPDs) and global initiatives targeting significant carbon reductions in cement production over the coming decades.
Mass timber refers to large, pre-manufactured, multi-layered wood panels used for structural systems such as floors and walls. Building with mass timber instead of traditional concrete and steel can meaningfully reduce emissions associated with building materials, often by double-digit percentage points.
Additional strategies, including material optimization, interior efficiencies, and adaptive reuse, can further reduce embodied carbon while aligning with cost and design objectives.
The Sustainable Value Proposition
As eligibility expands, the ability to execute efficiently becomes a key differentiator. Without the right capital partner, these elements can introduce complexity into the financing process.
CounterpointeSRE operates at the intersection of real estate and energy to specialize in delivering C-PACE financing with speed, certainty, and precision. With business agility and deep experience across asset classes and jurisdictions, the team works alongside developers and brokers to:
- Identify and maximize eligible measures early in the process
- Structure transactions that complement senior debt and equity
- Navigate program requirements across multiple jurisdictions
- Close quickly and cleanly to meet construction timelines
This execution-focused approach ensures that embodied carbon, along with other C-PACE eligible measures, translate into real savings, not just theoretical benefits.
Positioning Deals for What’s Next
Embodied carbon is quickly becoming part of the broader conversation around building performance, regulatory compliance, and investor expectations. The incorporation of embodied carbon measures unlocks access to additional low-cost C-PACE proceeds as well as other tangible benefits, including:
- For developers, incorporating these strategies can enhance asset value and future-proof projects.
- For brokers, it provides a compelling way to differentiate deals and to deliver added value to clients.
As more jurisdictions adopt expanded eligibility that includes reduction of embodied carbon, the projects that are best positioned will be those that proactively integrate embodied carbon into both design and financing strategies.
C-PACE is no longer just an efficiency tool; it is a flexible, scalable capital solution that has demonstrated incredible capacity to provide solutions and to adapt to changing markets. Embodied carbon is the latest evolution of the C-PACE industry’s ability to respond to the demands of sustainable finance and accelerate the improvement of building infrastructure at scale.