March 21, 2014—Facilities owners and managers could utilize a new UNEP FI report for real estate investors to make a business case for energy efficiency retrofits in their buildings. The new report by the United Nations Environment Programme’s (UNEP) Finance Initiative says that energy-efficient buildings can deliver up to 20 percent reductions in energy consumption and provide an overall better market value for investors.
According to the report, Commercial Real Estate: Unlocking the Energy Efficiency Retrofit Investment Opportunity, buildings account for approximately a third of the world’s energy consumption and global greenhouse gas emissions, and are a high-impact sector for urgent mitigation action on climate change.
Investments in overhauling the energy infrastructure of buildings with energy-efficient equipment can pay back quickly, depreciate slowly, and deliver returns for decades, continues the report. Combined with the risk of deepening regulatory requirements and volatile energy prices, the business case for investing in energy-efficient retrofits becomes straightforward, adds UNEP FI.
According to the U.S. Energy Information Administration (EIA), commercial buildings account for nearly 20 percent of U.S. energy consumption and 12 percent of the nation’s greenhouse gas emissions. However, the financial community needs more information to price accurately the risks and rewards of energy-efficient retrofit projects, says the report.
The report encourages investors to consider the economic rationale of investments in energy-efficient buildings for their own portfolios. Best practices from leading global real estate investors are summed up in a seven-step process:
- Ensure executive awareness of the business case;
- Measure and benchmark building energy performance;
- Set portfolio energy-efficiency targets;
- Link asset manager compensation to energy performance;
- Align lease clauses to enable retrofits (green leases);
- Include impact on asset value in investment analysis; and
- Take a portfolio approach to determining next steps.
“We believe real estate investment managers can incorporate much of the seven-step process outlined in this report to develop robust energy efficiency strategies and action plans,” said Laurie Weir, Senior Portfolio Manager at California Public Employees’ Retirement System.
“As building owners and operators, real estate professionals have an opportunity to reduce energy consumption and greenhouse gas emissions while increasing the value of their real estate assets,” said Charles Anderson, Director, UNEP Finance Initiative. “The paper strives to show investors that there are options available for all property mixes, and that possessing and managing the right information is crucial to unlocking the energy efficiency retrofit potential.”
UNEP FI’s work on energy efficiency and engagement with investor networks contributes the private sector’s viewpoint to UNEP’s Sustainable Energy for All (SE4All) initiative, which aims to double the global rate of improvement in energy efficiency.
