The Business Case for Operating an Energy-Efficient Portfolio of Buildings
New technologies and renewable energy systems tend to grab the headlines, but energy efficiency remains the single most cost-effective way to cut energy use in buildings. Energy management can also increase an organization’s value, lower risk, and deliver other business benefits.
Quantifiable Costs Savings
Compared to typical buildings, high-performing buildings save: 1
- $0.60 per square foot on operations and maintenance expenses annually
- $0.50 per square foot on janitorial expenses annually
- $0.53 per square foot on utility expenses annually
Higher Asset Value, Higher Rent, and Higher Occupancy Rates
- Sale prices from 1% to 31% higher
- Rental premiums 3% to 16% higher
- Occupancy levels up to 10% higher
Several studies on commercial mortgages find evidence of lower default risk among buildings with labels such as ENERGY STAR. 4 As a result, these properties often secure better loan terms (longer interest-only periods) and lower interest rates (typically about 30 - 35 basis points) than similar non-labeled buildings.
Appeal to Investor Demand
Investors increasingly evaluate how companies respond to environmental issues for insights into management effectiveness and the company’s long-term prospects. 5 Disclosing sustainability information helps public companies respond to this investor demand, and strong energy management programs can make a company more attractive to ESG-focused investors.
- 92% of the companies in the S&P 500 Index® publish sustainability reports.6
- Nearly half of Fortune 500 companies have at least one climate or clean energy target.7
Dozens of cities, counties, and states8 have established mandatory energy benchmarking and transparency requirements for commercial buildings, and many are starting to implement building performance standards which will define how much energy buildings are able to use. Organizations that engage in energy management have an easier time complying with these laws and are well positioned for future regulations.
Americans are concerned about climate change and report that an organization’s environmental record is important to them. The ENERGY STAR mark is one of the most influential consumer emblems in the nation, with 92 percent of survey respondents reporting that they use it in their decision-making. Organizations that align themselves with ENERGY STAR, either by becoming a partner, or by earning ENERGY STAR certification for one or more of their properties, can benefit through association from the program’s strong environmental brand.
6 https://www.globenewswire.com/en/news-release/2021/11/16/2335435/0/en/92-of-S-P-500-Companies-and-70-of-Russell-1000-Companies-Published-Sustainability-Reports-in-2020-G-A-Institute-Research-Shows.html (2021)