Sustainable Investment Initiative
Green & Climate Neutral Buildings
Green Mortgages
Green Building Securities
Green Building Underwriting Standards
Reduced Risk & Higher Valued Collateral
Cheaper Cost of Capital / Increased Liquidity
Green Convertible Securities
Improves quality of life
FSC Certified Wood Stops Illegal Logging &
Irreversible Dangerous Climate Change
Capital Markets Partnership (CMP) - Partial List
City of San Francisco
City of Chicago
City of Dallas
City of Denver
City of Miami
City of New York
City of Oakland
City of San Jose
City of Santa Monica
City of Seattle
Capital Markets Partnership
CMP Officers
Green Building Underwriting Standards Committee
Officers
Johanna Partin, Director, Climate Change Initiatives, San Francisco Mayor Gavin Newsom
Steve Hoffmann, President, Hoffmann & Associates
Rich Pietrafesa, Managing Director, Destiny USA
Tomek Rondio, President, Mortgage Green
Michael Schneider, Vice President, Marxa Kubo
Mario Silvestri, Vice President, Wells Fargo Wachovia
Ken Willis, Vice President & Director, Federal Home Loan Bank of Boston
Dan Winters, Managing Principal, Evolution Partners
EMERGENCY Consensus Standards Launched in April 2008 at JPMorgan
Chase, Wells Fargo Wachovia.
Unanimously Approved Sept. 2, 2008 & Amended Sept. 4, 2009
Market Tested by JPMorgan, Jones Lang LaSalle, CB Richard Ellis, Comerica,
Transwestern.
Develop / Finance / Occupy Green Buildings
US Conference of Mayors Support Resolution
June 2008
2.8 million green and
climate neutral buildings
& 1.2 million certified
sustainable products
needed by 2015 to
prevent Dangerous
Climate Change
From going
Irreversible
Green Building Value Summary
National Underwriting Education. Home Depot, Federal Home Loan Banks, Federal
Reserve & CMP determined that national education on green affordable housing
underwriting is important & needed because:
affordable community benefits the most from green buildings due to
operational
savings that are a bigger part of their budget, & improved
health from clean indoor air
including reducing triggers to asthma
Added Value Proposition is Very Clear. Wall Street due diligence released at the NYSE
with national statistically valid data. Waste of time & money to try to reinvent the value
proposition.
Measuring Green Affordable Value is No Different.
Added Value is From Specific Green Features / Technology. Due diligence also shows
increased cash flow & reduced expenses from:
efficiency
proximity to transit
onsite renewable
integrative design (capital, O&M, risk: e.g., energy recovery ventilator)
commissioning
improved indoor air
Green Building Value Summary
Technology Based Consensus National Approach for Measuring Value is Required to:
Avoid market confusion
Ensure green building commercialization
Reduce risk and uncertainty
Effectively deal with complexity
Conform with how the building industry is regulated by consensus
standards. This is why Phase 1 & PCA are required and LEED took off.
Ensure compliance with FTC Guides & differentiate from national
backlash on greenwash which is unlawful
Facilitate much needed large scale national financing
Ensure collateral value enhancement
Lack of technology based underwriting standards as part of
PACE is why FHFA & OCC are opposed: concerned with
more
collateral devaluation on the heels of subprime.
For these reasons, Underwriting Standards were created, unanimously approved &
market tested
Wall Street due diligence shows large scale national financing need for green building
renovations due to:
long term rising conventional energy costs based on globally validated data
imminent irreversible unmanageable dangerous climate change /ongoing
systemic financial market risks / need to stimulate the economy
Sustainable Investment Initiative
Capital Markets Briefing Paper: Business Case for
Commercializing Sustainable Investment©
Summarizes four years of Wall Street due
diligence with investors, investment banks &
rating agencies concluding that green buildings
and SMaRT certified sustainable products are:
• More profitable
• Less risky
• Preferred by investors in Survey
initiated with S&P covering over
$3.3 trillion in assets
• National statistically valid data
Peer Reviewed Briefing Paper was released for top management at
CMP New York Stock Exchange Press Conference, Aug. 18, 2009
Sustainable Investment Initiative
Green Building Securities (GBS) are bonds backed by green
building mortgages.
GBS & Green Value Score are part of Rebuilding
America’s call for 50 million green buildings in
the next 10 years.
There is substantial latent investor demand for
GBS. Based on successful precedent, investment
banks expect GBS Pilots to start a resecuritization
of the building stock providing cheaper cost of
capital for green building renovations facilitating:
• Refinancing addressing commercial real estate crisis
• Substantial climate pollution reductions
• Green jobs / economic stimulus
• Capital markets’ increased liquidity & confidence
Sustainable Investment Initiative
Green Building Securities (GBS)
LEED Certified Apartments have been
identified as GBS candidates with leading
financial institutions for pilot single
property / asset securities including
Affordable.
Higher ratings path forward has been identified with
Moody’s, S&P, Morningstar, Eagen Jones & I Banks with
Green Value Score© alignment with rating agency 10
financial factors.
Nine GBS Pilots with investment banks have been
identified including $500M funding allocations for GBS
pools.
UK – Stern Review – Nov ‘06
PROJECTED GLOBAL WARMING ECONOMIC IMPACT - Up to 20% of Global GDP
Ongoing Systemic Financial Markets Risks
•
•
•
Report analyzes economic global impacts of climate change
–
“Business as Usual” vs. global innovation and market-based intervention
–
QUOTE: “Climate change…greatest and widest ranging market failure ever seen…”
Relates costs/risks on economic, environmental, and social scales
–
Floods / Storms
– Mass Human and Species Migration
–
Agriculture Yields
– Species Extinction
–
Fresh Water Access
– Heat Waves / Cooling / Doughts
–
Disease
Bush White House 2008 Climate Report Concurs with these Impacts
Green Building Securities (GBS) Carbon Reduction in 5-10
yrs Enhances Energy Security & Stops Imminent Irreversible
Dangerous Climate Change
Fossil fuel use in 2000 (IEA) Allocation of 6.2 GtC/yr. (Princeton)
Allocation
ofof
6.2world’s
GtC/yrclimate
Buildings generate
most
pollution from electricity and heating. On average,
certified green buildings have 40% less
conventional energy & climate pollution.
Electricity: 40%
Fuels used directly: 60%
Electricity
Transportation
Heating
Economic Benefits
Projected* 70% US Commercial Green
Building Market Penetration*
Energy Savings & Daylighting:
Construction Waste Reduction:
Water Pollution Savings from Water Conservation:
Energy Savings from appliances & Lighting:
Added Value from Increased Occupant Productivity
(5%), IAQ & Reduced Absenteeism:
Health Care Savings
Emission Reductions’ Market Value:
$
Total
$36 Billion/yr
$6.7 B/yr
$20 B/yr
$24 B/yr
$632 B/yr
$75 B/yr
1.1 B/yr
$795 Billion/yr. value added
* 1. Leonardo Academy / MTS Projections 2003, Surgeon General 2006 (certified bdgs).
2. Green retail buildings will also accrue increased retail sales.
3. Excludes overwhelming benefits from avoided climate damages, & originator profits.
4. Dollar benefits are $200B/yr. for UK, $200B/yr. for rest of Western Europe, $87B/yr.
for Canada & $80B/yr. for Australia. GBS is a $4 trillion market (SEC 2003).
LEED EB CERTIFIED
National Geographic Society
Headquarters, Wash., DC
The Society added $16M in
value from this LEED
certification from a higher
appraised value, raising
tenant rents, lower
operating costs, increased
credit rating from Moody’s,
& lower interest rates on
large loans secured to the
building. Presentation at 2003
Congressional Green Building Luncheon
by Chris Liedel, CFO, National
Geographic Society.
Occupancy Rates
Energy Star Buildings vs Market Comparables
Occupancy Rates – Office
Source: CoStar Analytics
Down Market – Flight to Quality
Energy Star Buildings vs Market Comparables
Occupancy Rates – Office
Source: CoStar Analytics
Rental Rates
Energy Star vs. Market Comparables
Direct Rental Rates – Office
Difference = $3.80
Difference = $2.32
Source: CoStar Analytics
Rental Rate Separation
Doubled in Two Years From $2.30 to $4.60
Direct Rental Rates – Office
Source: CoStar Analytics
LEED Certified Rental Rates vs Peer Group
Early Returns on Minimal Data Points
Source: CoStar Analytics
Occupancy Rate Superiority
Significant Outperformance in Down Market
Occupancy Rates – Office
Source: CoStar Analytics
Academic Studies – Similar Results
over 3,000 green buildings compared to their peers - statistically validated
• CoStar Building Peering Study (2007)
• Miller, Spivey, Florance (2008)
– EPA Energy Star Partner of the Year
– American Real Estate Society Best Paper 2008
• CoStar Building Peering Study – Update 1 (2008)
• Fuerst and McAllister (2008)
• Eicholtz, Kok & Quigley (2008)
• CoStar Building Peering Study – Update 2 (2009)
• Pivo & Fisher (2009)
Note: CoStar continues to make its data set available to
academic researchers for further analysis
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