the business of sustainability
TRANSCRIPT
The business of sustainability
Michael Jordan, EVPJones Lang LaSalleJanuary [email protected]
@thetravellingmj
Michael Jordan
U.S. Congress Bracewell Sun MicroIT Six Sigma CONSULTING
Oregon
Palo Alto
Chicago
LouisvilleUniv. of Oregon
DC
JLLCommunications Business OpsPublic Policy Corp RE IT
Bus Driver, Waiter, Internet Entrepreneur
Colorado
MBA^ Glacier National Pk.
• Global service provider
• Green building, energy, and sustainability management consulting services
• >150 LEED certifications
• Energy services to >20,000 facilities
The physical layer of the corporate ecosystem
The system is subject to important constraints
5
Systems approach
6
The Natural Step 5‐Level model
Why
The JLL Approach
To deliberately combine sustainability strategies and drivers of shareholder value for maximum benefit.
7
Goal is to move the big needle.
Drivers of shareholder value
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Profitability
Capital Efficiency
Cost of Capital
Growth
Real Options
Market Confidence
x
‐
x
+
+ / ‐
Shareholder value
Economic value
Strategic value
Intangible, direct influence on stock price
Lead by influencing business context
Build brand and culture
Open new markets
Improve operations Manage risk
Make products greener
Source: “The Sustainable Company”, C.Laszlo, 2003
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Before1920
1920 to1945
1946 to1059
1960 to1969
1970 to1979
1980 to1989
2000 to2003
Existing building must be part of the solutionNearly 75% of the U.S. commercial building stock is over 20 years old.
9
Source: EIA data - http://www.eia.doe.gov/emeu/cbecs/cbecs2003/detailed_tables_2003/2003set9/2003pdf/c3.pdf
72% of the commercial building stock was constructed before 1990.
Millio
n s.f
. of C
omm
ercia
l Bui
ldin
g Sp
ace
U.S. Commercial Building Space By Age
Year Constructed
10
The new gold standard is green
The Empire State Building, an iconic, pre-war trophy office building, can catalyze change by cost-effectively reducing greenhouse gas emissions while attracting world class tenants.
Recognized throughout the world
3.8 million visitors per year
102 stories and 2.8 million square feet
CO2 emissions of 24,000 tons per yr
$11 million in annual energy costs
Peak office building demand of 9.5 MW
88 kBtu per SF per yr for the office building
0
20
40
60
80
100
120
Total
ESB
Cap
ital B
udge
t (mi
llion $
)
Capital Budget Adjustments for Energy Efficiency Projects
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2008 Capital Budget for Energy-Related
Projects = $93m+ 0%
Energy Savings
Sum of adds / changes / deletes =
+$13m
New Capital Budget w / Efficiency Projects =
$106m+ 38% Energy
Savings
The Business Case$500mm capital improvement program
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Key findingsESB can achieve a high level of CO2 and energy reduction cost-effectively.
A solution that balances CO2 reductions and financial returns is in this range.
There are diminishing (and expensive) returns for greater efficiency.
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Corporate sustainability strategy is influenced by multiple stakeholders
Executives
Customers
Suppliers
Employees
Regulators Governments
Media
Investors
Education & Research
NGO Interest GroupsCompetitors
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Source: OgilvyEarth Research (2011
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Institutional Investor Requirements Overview
• Transparency and disclosure of policies (of everything) is what SRI-focused institutional investors look for from any company, regardless of industry
• When considering the banking industry, SRI-focused institutional investors look for a strategic analysis of climate change and climate opportunities:
- Consideration by the company of its regulations, competitive and physical risks which would impact the company, its supply chain, the market in general and possibly its reputational risk.
• One of the biggest issues that SRI-focused institutional investors now look at is green financing
Annual Cost Savings Annual Revenue
1. Community Development Banking
2. Wind3. Solar4. Green Banking
Products
1. Energy Reduction
2. Digitization3. Air Travel
Reduction4. Facilities
Reduction
Brand @P/E = 10Intangible, direct influence on stock price
1. Managed risk2. LEED
Certification3. Competitive
Profile4. Employee
Engagement
Example Drivers of Value from Current ESG Programs
Drivers of shareholder value
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Profitability
Capital Efficiency
Cost of Capital
Growth
Real Options
Market Confidence
x
-
x
+
+ / -
Shareholder value
Economic value
Strategic value
Intangible, direct influence on stock price
Lead by influencing business context
Build brand and culture
Open new markets
Improve operations Manage risk
Make products greener
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Some observations for business leaders
1. Know what drives shareholder value for your company and make the business case from there
2. Use lifecycle financial metrics such as NPV (as opposed to payback or first cost)
3. Know enough about the science
4. Be deliberate
5. Make an impact
6. Do more good not just less bad Organizations I like:
ecoDistrictsThe Natural StepNet ImpactCeres / INCR
The business of sustainability
Michael Jordan, EVPJones Lang LaSalleJanuary [email protected]
@thetravellingmj