CEFC pioneers progressive sustainable finance in real estate credit
19 March 2025
The CEFC is investing $160 million in an industry leading sustainable finance approach in the Australian real estate credit market. The investment alongside Real Estate Credit Partners IV1 (RECP IV), a fund managed by Goldman Sachs Alternatives representing over US$7 billion of lending capacity including leverage, drives a whole of life-cycle approach to reducing building emissions in Australian construction projects.
The CEFC and RECP IV will co-invest in construction debt facilities, primarily in the residential and commercial office sectors, to lift sustainability standards by taking a full life cycle approach to measuring and mitigating carbon within projects. Their investments will leverage Goldman Sachs Alternatives’ international capabilities to demonstrate a progressive approach to sustainable debt finance in the Australian market.
Projects financed jointly by the CEFC and RECP IV in Australia will measure and demonstrate cost effective pathways to positively influence the carbon outcomes across projects ranging from embodied carbon, operational efficiency as well as physical climate risks, in line with international sustainability best practice.
Australia has a $450 billion commercial real estate debt market and will play a vital role in the climate transition, where it can use its size and liquidity to influence sustainability outcomes. We are excited to be working with Goldman Sachs Alternatives. Through this investment, we’re setting out detailed ESG reporting requirements for individual borrowers, to ensure the integrity of sustainability targets.Michael Di RussoCEFC Head of Property
CEFC Head of Property, Michael Di Russo said: “This investment demonstrates the power of private capital to rapidly effect systemic change across the building sector and encourage the implementation of stronger sustainability measures in the broader Australian real estate market.
“Our investment will also demonstrate how Australian non-bank lenders can enhance their investment approach from one of passive reporting to a more active approach focused on driving meaningful transitional change. This in turn will incentivise the construction sector to lift sustainability standards, which are essential to our transition to net zero emissions.”
Richard Spencer, Chief Investment Officer for Real Estate Credit at Goldman Sachs Alternatives, added: “Building next generation and energy efficient assets is at the forefront of driving asset quality, operating performance and investment outcomes in the real estate market.
“The RECP programme leverages our rigorous due diligence and valuation practices to identify high-quality real estate assets globally and ensure alignment between investing partners, borrowers and their customers. We are pleased to be working with the CEFC as we continue our long history of lending to high-quality real estate projects in the Australian market.”
Michael Di Russo added: “Australia has a $450 billion2 commercial real estate debt market and will play a vital role in the climate transition, where it can use its size and liquidity to influence sustainability outcomes.
“We are excited to be working with Goldman Sachs Alternatives. Through this investment, we’re setting out detailed ESG reporting requirements for individual borrowers, to ensure the integrity of sustainability targets.
“By also requiring an expansion of ESG reporting and disclosure frameworks, we’re aiming to support the ongoing development of sustainable finance frameworks and taxonomies, which are an increasingly important part of the global investment landscape.”
CEFC investment requirements
Each project is required to feature minimum standards across operational energy efficiency and embodied carbon. Additional requirements include the preparation of physical climate risk assessments, as well as the consideration of stretch targets aligned with the International Energy Agency definition of zero-carbon-ready buildings3. These include electrification and renewable energy supply.
This investment will leverage RECP IV’s existing sustainability framework which is designed to adhere to the requirements stipulated in Article 8 of the European Sustainable Finance Disclosure Regulation (SFDR).
In line with these requirements, funds must not only promote “environmental and/or social characteristics” but also provide a comprehensive disclosure of the initiatives they undertake. This approach ensures transparency and accountability in the delivery of sustainability outcomes.
Embodied carbon represents the greenhouse gas emissions associated with the creation of a building and its maintenance over its lifetime. It is estimated that between 2020 and 2050, embodied carbon will be responsible for almost half of new construction emissions.4
Approximately 40 per cent of the 50 billion tonnes of carbon emissions released globally each year come from the built environment, and 22 per cent of comes from embodied carbon emissions in infrastructure and construction.5
The CEFC has invested more than $3 billion in lifetime commitments to improve energy efficiency and lift sustainability in Australia’s property sector.
About Real Estate at Goldman Sachs Alternatives
Goldman Sachs (NYSE: GS) is one of the leading investors in alternatives globally, with over $500 billion in assets and more than 30 years of experience. The business invests in the full spectrum of alternatives including private equity, growth equity, private credit, real estate, infrastructure, hedge funds and sustainability. Clients access these solutions through direct strategies, customized partnerships, and open-architecture programs. The business is driven by a focus on partnership and shared success with its clients, seeking to deliver long-term investment performance drawing on its global network and deep expertise across industries and markets. The alternative investments platform is part of Goldman Sachs Asset Management, which delivers investment and advisory services across public and private markets for the world’s leading institutions, financial advisors and individuals.
Goldman Sachs has over $3 trillion in assets under supervision globally as of December 31, 2024. Established in 1991, Real Estate at Goldman Sachs Alternatives is one of the leading investors in real estate with over $60 billion in capital invested since 2012 across the spectrum of investment strategies from core to opportunistic and credit. The global team invests across all sectors with deep expertise across the capital structure, in assets ranging from single properties to large portfolios, through senior mortgages, mezzanine debt and equity.
2 Foresight Analytics, APRA
4 World Green Building Council, Bringing Embodied Carbon Upfront: Coordinated action for the building and construction sector to tackle embodied carbon.
5 KPMG, Tackling embodied carbon within Australia’s construction and infrastructure sector,p13.
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