Sustainable construction
- Samuel Fernandez
- May 18, 2020
- 8 min read
A key strategy against the climate crisis
Panama is a highly vulnerable country to the effects of climate change. Several meteorological events over the past three years have highlighted this growing vulnerability in key economic sectors, as well as in the natural resources and vital ecosystems linked to water availability, agricultural activities, human health, and the development of coastal and marine areas and cities. These natural events of meteorological and geological origin have caused numerous impacts, including the loss of human life, impact on transit through the Canal, destruction of public and private physical infrastructure, loss of agricultural production, loss of forests, and direct and indirect impacts on thousands of people.
The Ministry of Environment (MiAMBIENTE), together with the Ministry of Housing and Territorial Planning (MIVIOT), has identified three specific cases of impacts on communities within our territory due to climate change. These are those affected by Hurricanes Eta and Iota in 2020 in the province of Chiriquí, those affected by the rising sea level on Gardí Sugdub Island in Guna Yala, and the families of the La Solución community on Colón Island, Bocas del Toro province, who suffered from recurring flooding and lived in precarious conditions on sewage. In addition, through sea level rise scenarios, the institutions have been able to identify other sixty-three (63) communities that may be forced to move in the medium and long term.
Given this scenario, it is imperative to adopt and implement immediately Climate change adaptation measures in the construction sector, making informed decisions to address this growing challenge.
Some proposed responses already exist and are compiled in the National Strategy for Inclusive, Low-Emission, and Climate-Resilient Socioeconomic Development to 2050 ("ELP"), issued in Panama in compliance with its commitments under the Paris Agreement. This strategy guides and develops the National Climate Change Policy to 2050, accompanies the National Strategy for Action for Climate Empowerment ("ENACE"), and the National Gender and Climate Change Plan.
The Panama ELP represents the country's firm commitment to building a prosperous and sustainable future for all its citizens. Through this Strategy, Panama positions itself as a regional leader in climate action, demonstrating its determination to achieve low-emission, climate-resilient development.
Through a participatory analysis it was defined and integrated into this document four strategic pillars and twenty transformations, comprising more than eighty-eight key actions. The main objective is to reduce greenhouse gas (GHG) emissions, optimize carbon sinks, strengthen adaptation to climate change, and manage watersheds.
For example, Strategic Pillar 3, which refers to the management of watersheds around water conservation and biodiversity, indicates that it is necessary to regulate the incorporation of trees, green roofs, and green areas for collective use as a mandatory part of urban construction, thus promoting an ecological and community-based approach to building development that favors the reduction of GHG emissions; to include alternative construction approaches for water resource management, including the channeling, collection, and drainage of stormwater in urban environments; to update structural design standards and building regulations to incorporate climate change criteria..
It also calls for the reduction of energy consumption as an improvement in building design and construction and to train local and community governments with communities prone to displacement, on good practices for resilient construction.
What measures should we take?
Urban population growth and unsustainable construction are exacerbating the impacts of climate change, particularly rising temperatures in cities, putting human health and food security at risk. The absence of urban planning exacerbates these effects. It is also therefore evident that there is an urgent need to implement sustainable urban planning models to mitigate the impact of uncontrolled urban development on biodiversity and the effects of climate change.
The construction sector, responsible for 40% of greenhouse gas emissions, faces an urgent challenge: building homes that will meet the Sustainable Development Goals (SDGs) by 2030. However, this growth must be accompanied by appropriate planning that prioritizes rational land use and ensures that cities can fulfill their social and ecological functions without compromising the environment.
Cities, which are home to the majority of the world's population and where 2.4 billion people are expected to move over the next two decades, must be reimagined under a sustainable and resilient model. The lack of adequate strategies to mitigate the impact of climate change in these urban environments can lead to devastating consequences.
Initiatives such as the towers Bosco Verticale of Milan, which integrate nature into their structure and are energy self-sufficient, provide tangible examples of what the future of sustainable urban living could look like.
Investment in sustainable urban planning is crucial to ensuring that cities can address the climate crisis by promoting sustainable urban development that protects both people and the planet.
In the specific case of Panama, in accordance with the provisions of the Roadmap for a Circular Economy in Panama,
“By 2050, Panama will be a country that has successfully implemented the transition to a low-emission, circular economy. Energy will come from renewable sources. production processes will be optimized to maximize efficiency and minimize waste. food products will be used more efficiently. products will be recycled or composted at the end of their useful life. Organic matter will be converted into organic fertilizer or renewable energy. Vehicles and public transportation running on alternative fuels and clean, efficient energy will dominate. Buildings will use recycled and recyclable materials."
The document then adds comments on those sectors where intervention is necessary:
“The Cities and Construction sector is crucial to Panama's sustainable development. Cities are centers of economic activity and consume a large amount of resources. Promoting sustainable construction, optimizing urban infrastructure, and promoting sustainable mobility are key aspects of transforming this sector. The circular economy in this area involves promoting sustainable buildings, reusing and recycling construction materials, and optimizing urban infrastructure."
On the other hand, Resolution No. 3142 of 2016 issued the Sustainable Construction Guide for Energy Saving in Buildings (Official Gazette No. 28165). Subsequently, JTIA Resolution No. 002 of January 13, 2023, approved the Sustainable Building Regulations for the Republic of Panama V.2. 2022.
The National Strategy for Inclusive, Low-Emission, and Climate-Resilient Socioeconomic Development by 2050 projects significant reductions in GHG emissions. In the residential buildings sector, a 66% reduction is anticipated with measures currently adopted but not yet implemented, and an additional 78% if measures are implemented by 2050, both compared to actions already implemented before 2022. For commercial buildings, a 44% reduction in electricity consumption is expected by 2050 under an alternative scenario, and a decrease in GHG emissions of 75% (E2) and 79% (E3), both compared to actions already implemented before 2022.
How to finance this transition?
Panama's Sustainable Finance Taxonomy provides a framework for residential developers to access sustainable financing for their projects. It offers guidelines and criteria for environmentally sustainable practices in the construction sector, including residential construction. By aligning their projects with the Taxonomy, developers can:
Attract investors: Investors seeking sustainable investments can use the Taxonomy to identify projects that meet Panama's environmental objectives. Projects aligned with the Taxonomy can gain credibility and attract capital from investors interested in financing environmentally responsible initiatives.
Access to green financial products: Financial institutions use the Taxonomy to develop and label financial products as environmentally sustainable. Residential developers can benefit from these products, such as green loans or sustainability-linked bonds, which are often offered with favorable financing terms.
Improve project environmental performance: The Taxonomy describes specific criteria and metrics for different aspects of sustainable construction. For residential projects, this includes energy efficiency, water management, and the use of sustainable materials. By meeting these criteria, builders can improve the environmental performance of their projects, reducing their carbon footprint and contributing to Panama's environmental goals.
Reduce risks: Sustainable buildings tend to have lower operating costs due to their energy and water efficiency. They are also more resilient to the impacts of climate change, which reduces the risks associated with extreme weather events and resource scarcity. This can make projects more attractive to financial institutions and insurers.
Improve reputation and marketability: Constructing sustainable and environmentally friendly buildings can enhance a builder's reputation and brand image. This can attract environmentally conscious buyers and tenants, potentially increasing marketability and property values.
To access sustainable financing, residential builders must:
Familiarize yourself with the Taxonomy: Understanding the Taxonomy criteria, metrics, and requirements for the construction industry is crucial.
Incorporate sustainable practices: Builders must integrate the Taxonomy's principles into the design and implementation of their projects. This includes adopting energy-efficient designs, using sustainable materials, and implementing water-saving measures.
Obtain certifications: Obtaining recognized green building certifications, such as LEED or EDGE, can provide external verification of a project's sustainability credentials, making it more attractive to investors and funders.
Collaborate with financial institutions: Builders should proactively approach banks and other financial institutions that offer green financial products, demonstrating how their projects align with the Taxonomy criteria.
Monitoring and Reporting: Tracking and reporting on the project's environmental performance using the metrics described in the Taxonomy helps demonstrate transparency and commitment to sustainability, reinforcing the project's credibility with investors.
By understanding and applying the principles of Panama's Sustainable Finance Taxonomy, residential developers can access financing, mitigate risks, and contribute to Panama's transition to a more sustainable future.
A sustainable building increases its value over time more than a "normal" building. Therefore, in view of the enactment of Law 468 of April 24, 2025, which replaces Law 3 of 1985, which establishes a preferential interest rate regime for certain mortgage loans and dictates other provisions, There will be immediate demand from purchasers for these properties and they should focus on seeking out offers from builders who use environmentally sustainable practices in the construction sector to improve the environmental performance of their projects, reducing their carbon footprint and contributing to Panama's environmental objectives.
A mortgage-backed security is a bond whose value is derived from hundreds of mortgages that are securitized together and then rated and sold to investors. A "green" mortgage-backed security would group together mortgages on buildings that meet specific energy-efficient and environmental standards.
Green mortgage-backed securities may include energy-efficient and environmentally friendly commercial buildings. These green products could have higher ratings and a higher value than traditional mortgage-backed securities as a result of operational and marketing savings, as well as other tangible and intangible benefits associated with green facilities; value-added features that could result in better and cheaper access to capital for potential owners and investors in green building projects.
However, like other lending scenarios involving “green” buildings, this scenario relies heavily on the financial community being able to accurately measure and value the savings and reductions associated with “green” construction.
In conclusion, the path toward sustainable urban development in Panama is clear, and the regulatory mechanisms for the construction and financial sectors are in place. The convergence of new legislation seeking to reduce our environmental impact, the Sustainable Finance Taxonomy, and growing consumer demand for green living spaces creates fertile ground for innovation and growth in the construction sector. It's not just about adhering to new standards, but about creating a more resilient and valuable future.
At Lex Innova, we advocate for sustainable urban development and the use of available financial mechanisms in Panama to mitigate the impacts of climate change and achieve sustainable development goals.
If you are a developer, investor, or simply interested in understanding the legal framework and taking advantage of the opportunities offered by sustainable construction practices in Panama, Lex Innova is here to help. Our experience in urban development law and sustainable finance allows us to offer comprehensive guidance and strategic advice.
Contact us to explore how you can integrate sustainable practices into your operations and contribute to a greener and more prosperous Panama.
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