The $1 trillion wake-up call: Financing the future of resilient, net-zero housing
The financial costs of climate disasters have skyrocketed: From May 2024 to May 2025, the U.S. spent nearly $1 trillion dollars on disaster recovery and climate-related needs. The single-best place to focus mitigation efforts is on the built environment, as it accounts for 40% of annual emissions.
In particular, the U.S. residential housing sector, which accounts for 21% of energy consumption, is a critical opportunity. But decarbonizing multifamily housing at scale demands a fundamental shift in how we finance housing. Investors, lenders, credit partners and banks must treat sustainability not as a trend but as a financial imperative reflected in loan terms, investments strategies and risk assessment models.
Millions of people make their homes in multifamily housing — which includes townhomes, condominiums and apartments. The tools exist today to help the residential sector achieve net zero and improve their resilience, yet financial systems still favor the status quo, sidelining sustainable innovation due to outdated metrics and short-term timelines.
The World Economic Forum wrote in November 2024 that “amid growing climate risks and mounting regulations, banks and other financial lenders are uniquely positioned to drive the decarbonization of real estate.” The financial sector needs to rethink its traditional approach to lending and leverage its potential to transition the built environment to a low-carbon future. Aligning lenders, credit partners and banks behind a shared push for sustainable transformation is critical.
For far too long, traditional lending has tipped the scales against projects that have prioritized sustainability over faster and cheaper project developments. Challenges I’ve seen here include knowledge gaps around green certifications and misalignment between certification timelines and financial milestones.
Fixing this means updating underwriting criteria to recognize sustainability as a value-add, offering lower interest loans and extending payback periods, deploying loans tied to emissions reductions or energy benchmarks, revising loan terms to recognize cost savings from efficiency and electrification, and providing preferential rates for meeting verified green standards.
Credit models must also evolve. Most ignore climate risk in favor of short-term ROI. Existing underwriting processes don’t adequately assess the resilience and durability of sustainable properties, thereby overlooking a substantial portion of the value attributed to their ability to withstand physical risks. Embedding climate risk metrics into credit models (such as SBTi standards or the Greenhouse Gas Protocol) and developing tools that quantify resilience and long-term performance for all size financial institutions can help credit partners more accurately value these properties.
Finally, the role of banks in decarbonizing the residential sector cannot be overstated. Banks shape markets through what they decide to finance and don’t, sending a powerful message to investors, developers and the entire building materials value chain. Now is the time for banks to model best practices and embrace a new vision of future-proofing lending.
I frequently highlight the role of public-private partnerships in lending, as well as the effectiveness of leveraging blended finance — which combines public, philanthropic, and private capital — to de-risk climate projects. This approach attracts private investment to sectors that face challenges in securing funding. The good news is that strong leaders within the industry itself are leveraging their assets toward rapid decarbonization through values-based lending, which further maximizes their financial impact on the market and drives profitability.
At Climate First Bank, we realized early on that clean energy loans would require a tech solution. So we launched OneEthos, a fintech platform, that streamlines applications, accelerates approvals and offers 100% financing with no dealer fees or prepayment penalties. In just two years, we’ve processed over $225 million in applications and partnered with over 700 contractors nationwide.
Our model also empowers community banks, credit unions, CDFIs and green banks to expand their loan portfolios through participations. We also helped launch Sustainable Credit Partners (SCP), a joint venture providing bridge loans to commercial and multifamily real estate owners – tying competitive rates to measurable improvements in energy use, water efficiency and emissions reductions.
As we expand these initiatives, I look forward to also utilizing my position as a new advisor to the Global Network for Zero (GNFZ) to integrate my expertise in net zero certification platforms and processes with my experience in green banking and climate finance. Through GNFZ, projects implementing efficiency and decarbonization strategies can obtain third-party modeling and verification of their impact, thereby reducing overall financing risks associated with these projects.
The built environment is not just a source of emissions; it’s a solution that if leveraged properly can be resilient and restorative for generations to come. If adopted at scale, green financing can dramatically lower emissions from the built environment, unlock massive operational and financial efficiencies, provide early adopters with a competitive edge and drive a broader cultural shift in real estate and finance – all while driving healthy net interest margins for banks and finance providers alike.
The choices we make today in how we approach the residential sector will resonate and lock in either efficiencies or inefficiencies for decades to come. And for the lenders, credit partners and banks who hold the key to unlocking its full potential, decarbonization is no longer optional — it’s a foundation of doing business.
Chris Castro is the executive vice president and chief sustainability officer of Climate First Bank and an advisor at Global Network for Zero, the world’s premiere net-zero certification body.