It’s about the money. Again.
The U.S. Department of Energy (DOE) and the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) have announced an agreement “to improve building energy standards that reduce energy costs and carbon pollution nationwide.”
I applaud this step. There are many groups advocating for better energy policy, but the DOE and ASHRAE are the big guns; leadership and support from influencers like them are important. That said, an agreement alone isn’t enough. What’s missing is that energy efficiency / sustainability isn’t yet a part of the fabric of business. For example, even energy-efficient construction and retrofits in the commercial real estate arena could not be viewed as “mainstream” at this point.
The number one reason that energy efficiency in commercial real estate hasn’t gotten over the mainstream hump? Return on investment.
For sure, there are plenty of reasons why this hasn’t happened yet: the economy, overt and covert politics, and the costs associated with what is largely considered a confusing and inefficient sustainability industry. But to me, the number one reason that energy efficiency in commercial real estate hasn’t gotten over the mainstream hump? Return on investment.
At the end of the day, real estate executives are beholden to their stakeholders. This fiduciary relationship boils down to a set of economic standards that govern capital investments — both limitations on assumed risk based over a range of investment levels, and minimum investment return requirements as measured by traditional cost benefit ratios and company specific performance hurtles. How can a sustainability investment be reasonably considered in the face of these standards?
Secondly, sustainability investments are a bit of a mystery relative to the other investment opportunities a real estate firm might consider. Even if a sustainability investment were expressed in the financial terms necessary for it to compete for scarce company capital, how does a financial manager (or an asset manager) know that the proposed sustainability project is in fact the best approach to achieve optimal energy and economic performance?
Our surveys show that corporate America, including the real estate industry, generally understands that it has a responsibility reduce greenhouse gas emissions and otherwise support the environment. However, the ability to perform standard investment analysis and to evaluate the viability of (sustainability) investment options is critical. That’s a fundamental component of for-profit business — it’s their language. Without it, the efforts of many will be limited to lighting upgrades.
By crunching an incredibly large amount of data we can produce a set of optimized energy performance and financial outcomes.
ECON offers one solution. We’ve developed an energy investment system for new and existing buildings. By crunching an incredibly large amount of data we can produce a set of optimized energy performance and financial outcomes, taking into account every feasible low-energy mix of technologies — for everything from insulation to HVACto windows — and how they can best be implemented as part of a building energy strategy.
Providing critical investment data is essential. If an energy efficient building could optimize its financial and environmental performance, all the better. Data, and an optimal strategy versus a random one. That’s the way I see it.