Making the Financial Case for Sustainable Design

Abstract

Developers and building owners are increasingly considering sustainable design options to enhance marketability, to meet corporate “green goals,” or simply as contributions to a more sustainable future. Regardless of motivation, the consideration of green designs is always prefaced with the question of “how much more does a sustainable design cost?” For the growing number of Leadership in Energy and Environmental Design LEED certified design professionals and others interested in promoting sustainable designs, this reluctance to accept anything other than marginal increments over least initial cost options is frustrating and, in some cases, costly. Green designs that are viewed as too “blue sky” can generate concerns that designers are less attuned to cost issues considered important by owners and developers. The irony in this situation is that many sustainable design components related to energy-efficiency investments provide returns greater than those achieved by developers/owners with other financial investments. One reason for this investment disparity is the traditional use of payback analysis to evaluate energyefficiency investments, with paybacks of two years or less often required for a project to qualify as a sustainable design option. This rule of thumb decision criterion stands in stark contrast to the sophisticated financial risk-management analysis such organizations use to assess their financial investments. This paper describes Energy Budgets at Risk EBaR Jackson 2008 , a new quantitative energy risk-management process that evaluates and presents risks and rewards associated with incremental investments in energy-related sustainability designs. EBaR analyses and presentations provide a bridge that translates energyefficiency and green designs into a financial presentation and a language familiar to CFOs and financial administrators. EBaR case study results Jackson 2008 are presented below to illustrate this process.