At the recent Urban Land Institute Spring Conference in Charlotte, NC, I joined 3,300 real estate executives from all parts of the U.S. to share information, learn and network. Of course there was the usual smattering of ”green” sessions, including a moving keynote presentation by Amory Lovins, founder of the Rocky Mountain Institute. Regrettably, Amory’s session was not well attended, perhaps due to the early morning hour.

Even more disturbing, however, was the casual conversation I had later that night with an attendee who is responsible for the real estate investments of a public pension fund. After the initial pleasantries I asked him if they had any policies for investing in “green” buildings. “No,” he said, explaining that any such policy would be a breach of their fiduciary responsibility to maximize the value of their investments. Furthermore, he added, he simply couldn’t justify asking the bus drivers and janitors whose pensions were his responsibility to safeguard, to make due with less so that they could invest in green. Unfortunately he was not interested in continuing the conversation. More unfortunate is that he is not alone in his flawed thinking.

Flawed Thinking Is Holding Us Back

The assumption that a policy that supports investing in green buildings will lead to lower returns and jeopardize the pensions that are funded by those investments is flawed. In fact, everything points to the contrary: energy and water efficient buildings with healthier indoor environments are more valuable than their more traditional “twins” and more desirable to owners, tenants, investors and lenders.

The flawed thinking described above is shared by many of my real estate colleagues and is one of the key challenges to greening the built environment. Although no one will admit to wanting to own, occupy, lease, invest in or lend to leaky, inefficient, obsolete buildings, many are candid that the benefits of investments to transform these buildings into sustainable, efficient assets have not been sufficiently established to motivate them to take action. Thus only a tiny percentage of the 125 million buildings in the U.S. can be considered green, a reality which is illustrated by the fact that 15 years after the “birth” of the green building movement, only 35,000 buildings in the U.S. — .03% of the total — have earned the Leadership in Energy and Environmental Design certification.

What’s Needed To Reach the Tipping Point

Here’s what we think is needed to reach the tipping point for greening the built environment:

• better data about the results of green initiatives, including cost/benefit, payback period and ROI analyses
• education that incorporates the social science of behavior modification so we can engage everyone in the food chain to do things differently
• transparency on the part of those who are out ahead of the pack on lessons learned and best practices, and platforms to make this information readily available
• consistent federal, state and local regulatory policy that encourages, incentivizes and, where appropriate, mandates green building practices, features and initiatives
• and of course, increased demand by end users.

Let us know what YOU think about all of this. Your opinions, thoughts and suggestions are welcomed. And, let us help you take advantage of the greatest business opportunity of our time — sustainability — for breakthrough business results.

As winter transitions to spring, the news is full of stories about record high temperatures throughout the United States. In Europe, it’s been a winter of record lows. These possible indications of climate change prompted us at Green Edge to focus our sustainability lens on risk management. We believe that the ramifications of climate change — or global weirding — are unavoidable and must be managed. To those who fail to do so, beware!

If your business is real estate, here’s what we think you should be doing to factor climate change into your risk management strategies.

1. Build assumptions about extreme weather events into your planning. Consider risks from rising sea levels, more intense storms, flooding and surge damage. Underwriting these risks based on historical climate data is no longer sufficient. The payoff from climate preparedness could be substantial: According to Munich Re, the world’s largest reinsurance firm, in 2011 insured losses in the U.S. from weather related events topped $105 billion, even more than the record-breaking losses incurred in 2005, the year of Hurricane Katrina.

2. Green your real estate relationships so that the risks and rewards of sustainable initiatives are appropriately allocated. As thousands of regulations across the country increasingly demand that green features be incorporated into the built environment, make sure that your ongoing rights are protected and your future obligations are limited. New York, San Francisco, Dallas, Washington DC, Seattle and other jurisdictions too numerous to name are phasing in green mandates that today’s leases, acquisitions and loans will be subject to. Make sure you are protected.

3. Focus on reducing energy and water consumption as a strategy to limit your exposure to price and availability volatility. Water shortages are a way of life in the west. Energy blackouts and brownouts are no longer limited to the developing world. In the past five years, energy costs have skyrocketed, bottomed out and are again on the rise. Plug up your leaky buildings and faucets and reduce your exposure.

4. Make sure that your real estate assets stay competitive. As sustainability demands on the part of tenants, lenders and investors continue to increase, green building features, such as proximity to public transportation, energy and water efficiencies, renewable energy and indoor environmental quality will be the new norm. Investigate and invest in these features now.

5. Data, data, data; then communicate, communicate, communicate. Make sure you get the good word out to your stakeholders about the climate threat adaptation policies, procedures and initiatives that you have put into place, provided that you have measurable, verifiable data to back it up. Greenwashing can be more damaging than saying nothing at all.

As part of our in-depth focus on real estate, Green Edge is evaluating the correlation between a company’s overall green rankings and their green building performance. We searched high and low among the hundred-plus green company ranking systems for a correlation of these two factors on a company-by-company basis and we didn’t find very much.

Taking matters into our own hands, we decided to test drive CSRHub, a new online sustainability and corporate social responsibility rating system, with the green building correlation question in mind.

CSRHub provides CSR ratings and information on nearly 5,000 companies throughout the world. Their ratings are arrived at by aggregating data from 140 sources including other rating systems, sustainability analysts, NGOs and government agencies. Although CSRHub aggregates over 10 million data elements, many of which, such as energy and water use, are factors in green buildings, we found no specific information on how the 5,000 rated companies are greening their built environments.

We looked at four companies that promote leadership in green buildings to see how they were rated by CSRHub: Bank of America, Exelon, Adobe and Skanska.

They all have made greening their facilities a focal point of their overall sustainability effort and in addition to having iconic green headquarters, they have earned at least one, and in Adobe’s case three, Leadership in Energy and Environmental Design Platinum certifications, the highest level possible. Interestingly, when we looked at their overall CSRHub ratings, they all fared reasonably well, in the upper 50s and 60s. The top CSRHub rating is a 76, which only three companies worldwide have achieved.

Thus anecdotally at least, we have started to confirm our suspicion that there is a correlation between a company’s green building achievements and its sustainability ratings. But there is a big, gaping void when it comes to making an analytical, data-driven determination about how a company’s green building achievements affect its sustainability ratings. Given the significant greenhouse gas emissions that emanate from the built environment (approximately 40%) and the significant contribution that greening the built environment makes to overall carbon footprint reduction, we feel that this hole on the part of sustainability rating systems is one that needs to be corrected.

Cynthia Figge, Co-Founder of CSRHub agrees with us, noting “CSRHub draws from some of the most robust and diverse sources of corporate performance data out there and there is a real lack of information about how greening the built environment impacts sustainability ratings. Yet information on a company’s greening of their real estate is significant in the whole picture of a company’s sustainability and CSR efforts. As the sources that we draw upon examine the built environment, CSRHub will integrate this important piece of the sustainability movement into our data.”

Stay tuned Cynthia and the rest of the team at CSRHub — we’re onto something here. Green Edge is gathering data on this important aspect of green company rankings and will continue to stay at the cutting edge and speak out on this very important issue.

At Green Edge it’s all about making a meaningful difference, whether we are helping our private sector clients transform their companies or our public sector clients transform their communities. Now that we have put our stake in the ground (see our New Year’s resolution) here is a preview of how we are making a difference when it comes to the good, bad and ugly of greening the built environment.

 The Good

As of February 27, 2012, almost 1.8 billion square feet of commercial property and over 18,000 homes in the United States had earned the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) green building certification. Over 6.5 billion square feet of commercial property and almost 75,000 homes are registered for certification. This is a clear sign that green features such as energy and water saving infrastructure are being incorporated into new and existing buildings throughout the country. The meteoric rise of “green building” from a concept that had barely emerged five years ago to one that is transforming the real estate and construction industries is certainly noteworthy.

Tracking the LEED certification and registration numbers is a good way to gauge just how far we have come in a relatively short period of time. But we have a lot more work to do if we are going to make a meaningful dent in the carbon footprint of the built environment. In addition to building green, we need to learn how to operate and occupy our buildings in a sustainable way, with a focus on conserving resources and maintaining optimum performance levels and non-toxic indoor environments.

Green Edge has taken on this challenge and is working with clients at the intersection of behavior modification science and sustainability to achieve exponentially meaningful, measurable and verifiable carbon reduction goals.

 The Bad

As encouraging as the LEED certification and registration numbers are, there is an even more compelling number that conveys the magnitude of what we have not accomplished to date. It also confirms that the real estate industry is not taking advantage of an enormous opportunity for bottom line and carbon reduction results. That number is $32 billion. According to the Environmental Protection Agency (EPA), commercial property owners and tenants in the United States could shave more than $32 billion annually off their current energy bills if they plugged up holes and installed other energy efficiency features in existing buildings. Also according to the EPA, energy efficiency is the fastest, cheapest, and largest untapped solution for saving energy, saving money and preventing greenhouse gas emissions. Our collective failure to capture this opportunity is bad for business, bad for the economy and bad for the environment.

At Green Edge, we are helping commercial property owners and tenants take advantage of this opportunity to enjoy the bottom line and carbon reduction results that go hand in hand with increased energy efficiency.

 The Ugly

What’s downright ugly, in our opinion, is the status quo when it comes to a public financing vehicle, often referred to as Property Assessed Clean Energy bonds or PACE, which was developed to facilitate energy efficiency improvements in residential properties. Beginning in 2005 in California, PACE enabling legislation quickly spread to more than 16 states, but in 2010 PACE programs throughout the country were stymied when Fannie Mae and Freddie Mac refused to back mortgages on properties that had benefited from a PACE financed retrofit.

Notwithstanding this impasse, Green Edge is currently working with a local municipality to transition its residential PACE financing program to commercial tenant occupied properties in a manner that can be scaled regionally and ultimately nationally.

With the potential to retrofit millions of inefficient, leaky buildings, save millions of dollars in energy costs, create thousands of jobs and save tons of CO2 from being emitted into the atmosphere, this ugly reality of stalled PACE programs can be transformed into an exponentially significant economic, carbon and physical win-win-win. Green Edge is on the front lines working to make it happen.

Let us know what’s on your list of good, bad and ugly when it comes to greening your built environment. As always, we look forward to helping you transform the challenges to making a green difference into opportunities for breakthrough business results.

I know it may sound corny, but Green Edge has made a New Year’s Resolution and I thought I would take a few moments to share it with you. For us, 2011 was a year of growth and progress that brought our focus back to the future, or in other words, back to real estate and the built environment. Let me explain, and then I’ll share our New Year’s Resolution with you.

Full Circle and Back to the Future

When I founded Green Edge in 2007, after two decades as a real estate executive and attorney, I knew that the need to reduce the carbon footprint of the built environment would present challenges and opportunities with enormous potential. I believed then, as I do now, that meeting these challenges and harnessing these opportunities would be the basis for competing and winning in the 21st century for both public and private sector organizations. And thus, our Green Edge sustainability lens focused on real estate and the built environment.

We worked on greening new developments and qualifying them for LEED certification. We developed a proprietary green lease strategy and customized it for an organization that occupies over one million square feet as a tenant. We helped a municipality with its green retrofit program for single family homes.

Then the Great Recession hit and the real estate world came to a standstill. We used that downtime to expand our sustainability focus to other aspects of organizational sustainabilty including supply chain, transportation and logistical issues that contribute to greenhouse gas emissions.

We developed Green Edge Workshops to enable our clients to organically create and implement sustainability initiatives across departmental lines and engage their internal teams around climate change solutions. We established the Green Edge Network of Preferred Providers to give our clients the benefits of a broad range of experts on an as-needed basis and we began publishing the Green Edge Newsletter.

A Big, Hairy, Audacious Opportunity

But somehow we always came back to real estate and the built environment. Our supply chain assignments revolved around facilities procurement. Our public sector clients asked us to create programs to scale the greening of existing buildings. Our work in transforming vague CSR mandates into specific, measurable and time-oriented goals evolved into greening a new headquarters location.

When we reflected on this, we realized that our work over the past five years brought us full circle back to the future. And the skills, expertise and perspective that we gained reaffirmed the significance of our original vision:

Real estate and the built environment is where we can make the biggest, hairiest and most audacious contribution to climate change solutions.

And that’s our New Year’s Resolution! We are bringing our focus back to greening real estate and the built environment as the key to giving you — our clients, colleagues and friends — the tools to transform the products and services you sell, the way you do business, and ultimately your organizations, as the basis for competing and winning in the 21st century and as the basis for a more sustainable world.

Please contact us to discuss how Green Edge can help you green your built environment and harness the greatest opportunity of our time — sustainability.

And let us know what your New Year’s Resolution is!

During November, Ellen Sinreich instructed real estate professionals from coast to coast about green leases as she made formal presentations at the two-day Negotiating Commercial Leases program in New York City sponsored by the Practising Law Institute and at the two-day Retail Green Conference sponsored by the International Council of Shopping Centers in Phoenix.

Recognizing that the lease is the single most important legal document when it comes to greening a tenant-occupied commercial property (after all the lease governs how the property is occupied, operated and renovated and how the money flows between the parties), Ellen recommends the following step-by-step process:

Step 1

Start way before you get to the lease by formulating building-wide environmental standards. Standards should include resource consumption, data collection and sharing, indoor environmental quality and recycling.

Step 2

Educate every member of your team that will touch the lease/tenant about these environmental standards. These team members include the individuals responsible for leasing, property management, legal, construction and finance.

Step 3

Quantify how achieving and complying with the environmental standards will result in an economic win-win for landlord and tenants.

Step 4

Communicate about the win-win environmental standards to every member of the tenant team including the deal makers and people in the legal, facilities management, construction and accounting departments.

Step 5

Make going green easy with green talking points for your team members and a green guide for tenant team members.

This month Green Edge focuses its sustainability lens on green supply chains and what that means for the supplier. Although the momentum for climate change legislation and regulation has slowed here in the U.S., leading companies throughout the world continue to pursue green strategies as a means to enhance performance and profits. In addition to greening their buildings and operations, these companies are aggressively wringing waste, cost and emissions out of their supply chains.

So what does that mean for suppliers—- the millions of companies whose very existence depend on selling goods and services to the Ikeas, Procter & Gambles and General Electrics of the world?

For suppliers that are effectively managing their carbon footprint—- reducing the resources they consume and the waste they create—- and providing products that are carbon footprint solutions for their customers, this is good news.

For those suppliers that are not working on reducing their carbon footprint and whose products do not provide carbon footprint reduction solutions for their customers, their increasing obsolescence is inevitable, in our opinion.

Here are the two key questions that we recommend suppliers ask themselves, not only to preserve, but to increase their competitive prowess, given the importance of sustainability as a mainstream concern throughout the world:

Do your products provide a carbon footprint reduction solution to your customers?  

If you are a supplier to Coca Cola, McDonald’s, Pepsico or Unilever, all of whom have pledged to phase out HFC refrigerants completely by 2015, you’d better be able to say yes. If you manufacture or sell lighting equipment, you’d better be able to say yes, as improvements in lighting technology continue to meet the demands of companies like Best Buy, Deutsche Bank and Simon Property Group for lighting that provides greater energy efficiency and longer useful lives.

Is your company managing its carbon footprint? 

If you are a vendor to Home Depot, Citibank, Johnson & Johnson or IBM, you’d better be able to say yes. These and other corporate giants throughout the world are factoring environmental stewardship into their evaluations of existing and prospective vendors. Efforts on the part of their vendors to measure, monitor and reduce their energy, water and waste are becoming increasingly important as these and other corporate behemoths use green supply chain management initiatives to reduce costs and expand the emission benefits of green initiatives beyond the four walls of their own operations.

Leading corporations are evaluating the environmental stewardship of their vendors.

IBM was ranked #1 in Newsweek's 2011 U.S. Green Rankings

Following closely on the footsteps of the recently released Green Edge research report Green Ranking Systems: How They Really Work, Newsweek published its 3rd annual Green Rankings. Given our evaluation of Newsweek’s ranking system in the Green Edge Report, we were eager to review their latest rankings.

Of the top five ranked U.S. companies, three are information technology companies: IBM, HP and Dell.

Of the top five ranked global companies, four are financial services organizations: Munich Re (Germany), National Australia Bank (Australia), Bradesco (Brazil) and ANZ Banking Group (Australia).

These results are not surprising, given that Newsweek does not distinguish between companies in environmentally harsh industries like mining and those in environmentally tame industries like information technology and financial services.

We are pleased to announce that Green Edge has released an original Research Report entitled Green Ranking Systems: How They Really Work. In this report we provide an in-depth analysis of seven green company ranking systems that differ significantly in their approach and results.

Since 2000, close to 100 of such ranking systems have been established. Although this proliferation of green ranking systems is a testament to the remarkable transition of sustainability from a fringe movement to a mainstream concern, both the corporate subjects of the ranking systems and their stakeholders—- the investors, consumers and regulators to whom the rankings are directed—-are often confused as they attempt to navigate the myriad systems available.

Green Edge studied the following ranking systems in great detail over the course of more than a year: Corporate Knights Global 100, SB20, Tomorrow’s Value Rating, Southeastern Corporate Sustainability Rankings, Dow Jones Sustainability Indexes, Newsweek Green Rankings and the Toxic 100 Air Polluters Index.

Our Research Report compares and contrasts these systems and their divergent methodologies and foci in order to enable our corporate and stakeholder audiences to identify which systems they can rely on and, perhaps more important, why.

Please contact us for a copy of the report or to learn how your organization can improve its green rankings and enjoy the financial benefits that accompany widespread recognition of sustainability achievements.

We are pleased to announce that Green Edge has  released an original Research Report entitled Measuring the Sustainability of Real Estate Funds: A New Tool with Teeth. In this report we analyze a recently developed tool for ranking environmental stewardship, this time in the realm of public and private real estate funds.

This tool, the Global Real Estate Sustainability Benchmark (GRESB) was launched in 2009 by the GRESB Foundation,a consortium of academic institutions, institutional investors and industry bodies. Our Research Report follows the Foundation’s August 2011 publication of the results of the second GRESB Survey.

GRESB seeks to reduce the built environment’s carbon footprint by introducing transparency and competition. Real estate funds that choose to participate are asked to provide information about the carbon footprint of their investments including energy and water consumption, waste collection and recycling, greenhouse gas emissions and employment programs. The first series of questions focuses on policies and the place that environmental issues have in management decisions, while the second series of questions investigates the actual measurement and impact of these policies.

Please contact us for a copy of the report or to learn how your fund can be a leader rather than a laggard when it comes to carbon footprint reduction and the financial success that comes with it.