Ever wonder how it is that two people can see the same thing, yet walk away with different interpretations? The “glass half full or half empty” analogy is a classic example. I have found this phenomenon particularly relevant to how many financial leaders view the financial viability of green buildings. Next time you have lunch with your CFO, you might want to bring this article along.
A friend recently heard a talk by Dr. Lowell Catlett, Professor of Agricultural Economics and Agricultural Business at New Mexico State University. Dr. Catlett explains it this way, says the friend, “It is the quality of the visionary that matters, not the vision.” Two people will agree there is water in the glass (the vision) but they are seeing it from divergent perspectives (the visionary), shaped by their environments and experiences.
My point is, if you show two people a high performance building, one might see a building with expensive upgrades that will make it harder for the owners to turn a profit; but the other might see a building that offers many attractive improvements that will enable him to “sell up.” That’s why studies like the one I’m about to share with you are so vitally important to the continued investment in and development of high performance, sustainable, green buildings.
Last fall the U.S. Green Building Council announced the results of a study that proves beyond measure that green buildings are highly cost effective. It stands as the most comprehensive study ever done on the cost and financial benefits of green buildings, demonstrating that the financial benefits exceed the cost by a factor of 10.
The study was conducted for 40 California agencies by Lawrence Berkeley Laboratory and Greg Kats, a founding Principal of Capital E, a premier national provider of strategic, technical, and deployment assistance for clean technologies, distributed energy and green buildings. Greg is a leading expert on clean energy technologies and high performance buildings. From 1997 to 2001 he served as the Director of Financing for the country’s largest clean technology R&D and deployment program (>$1 billion) at the U.S. Department of Energy.
This comprehensive and far-reaching report confirms that minimal increases in upfront costs of about two percent to support green design would, on average, result in life cycle savings of 20 percent of total construction costs – more than 10 times the initial investment. For example, the report finds, an initial upfront investment of up to $100,000 to incorporate green building features into a $5 million project would result in a savings of $1 million in today’s dollars over the life of the buildings.
The report concluded that financial benefits of green design are between $50 and $70 per square foot in a LEED building, more than 10 times the additional cost associated with building green. The financial benefits were found to be in lower energy, waste and water costs, lower environmental and emissions costs, and lower operational and maintenance costs and increased productivity and health.
This study, drawing on national data for 100 green buildings and an in depth review of several hundred existing studies, found that sustainable buildings are a very cost-effective investment. Summary of Report Findings:
Financial Benefits of Green Buildings
Summary of Findings (per ft2)
20-year Net Present Value
|Operations and Maintenance Savings
|Productivity and Health Value
||$36.90 to $55.30|
||$52.90 to $71.30|
|Average Extra Cost of Building Green
||(-3.00 to -$5.00)|
|Total 20-year Net Benefit
||$47.90 to $68.30|
Source: Capital E Analysis
As a result of this study, the California Department of Finance, for the first time, has signed off on the existence of financial benefits associated with improved health productivity and lowered operations and maintenance costs in green buildings. The California Board of Regents also drew on the early findings of this study and is moving forward in pushing for all state higher education new construction to be “green.”
This report, I believe, is the most current “Smoking Gun” of the green building movement. It documents a cost analysis of 33 LEED projects in the areas of energy use, emissions from energy, water conservation, waste reduction and productivity and health. It spotlights technologies that we’ve discussed in this space, such as under floor air and green roofs. And it calculates the insurance benefits of green buildings, another area we’ve touched on in the past.
I strongly urge you to read The Costs and Financial Benefits of Green Buildings and watch your visionary perspective change…It might also help convince the CFO!