Public-Private cooperation can overcome barriers

Posted by:
Lauralee Martin
Chief Financial Officer

Many companies that pledged to reduce their carbon emissions by 10 or 15% five years ago have learned that saying it is easier than doing it. When the economy turned down, many business leaders abandoned their focus on carbon reduction in order to focus on operational cost reduction, never realizing that the two goals are complementary – at least when it comes to their real estate.

Every company uses real estate – to house their employees, distribute and sell their products, and hold their electronic data servers – and the energy these properties consume often represent a large share of a company’s total carbon footprint. Low-cost energy management strategies can reduce energy cost and carbon, but the real opportunity is in retrofits to make heating, air conditioning and ventilation, lighting and other systems more efficient. A retrofit of a large building can cost millions of dollars, but the energy savings typically repay the upfront cost in five years or less.

The barriers that prevent most owners from engaging in retrofits fall into two general categories. One challenge is known as the “split incentive,” wherein the cost is largely absorbed by the owner while energy cost savings go largely to the tenants who have no financial incentive to conserve energy as a result. The other barrier is a lack of financing for retrofits. Both barriers are being addressed by government and business leaders, but the complexity of the challenges make easy solutions unlikely.

Removing the barriers to retrofits is a puzzle for real estate industry leaders, policy makers and non-profit groups to solve together. In our work with leading organizations from the World Economic Forum to Greenprint Foundation to CDP Cities and BICEP, we’re determined to be part of the solution.

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