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Financing Green Buildings

Money_TreesThere is a continued perception in the development community that building green necessarily costs more.  In a 2007 global survey (summarized in the report by the World Business Council on Sustainable Development (WBCD) “Energy Efficiency in Building: Business Realities and Opportunities”) 1400  respondents estimated the additional cost of building green at 17 percent above conventional construction, more than triple the true cost difference of about 5 percent.

Several studies suggest that green building can result in significant economic savings by improving employee productivity, increasing benefits from improvements in health and safety, and providing saving from energy, maintenance, and operational costs. One of the most rigorous studies to date on the costs and benefits of green buildings was conducted by Gregory Kats. (The Cost and Financial Benefits of green buildings, State of California Report, October 2003).

Drawing on national data for 100 green buildings and an in-depth review of several hundred existing studies, the study found that green buildings are a cost-effective investment. The report concluded that minimal increases in upfront costs of about 2-5% to support green design would, on average, result in life cycle savings of 20% of total construction costs — more than ten times the initial investment.

Kats also suggests that the cost of green buildings is coming down, as project teams become experienced in green design and the cost of green products, components, and materials comes down.  In addition, he recommends further study on first-cost issues such as:

• Insurance-related benefits in reducing mold and moisture-resistant systems
• Owner benefits such as higher rents, lower vacancy rates, faster tenant lease-up, and greater internal rate of return on investment (ROI)

References/Resources:

The Costs and Financial Benefits of Green Buildings
https://www.usgbc.org/ShowFile.aspx?DocumentID=1992
This comprehensive report compares the typically higher capital costs of green buildings to cost savings in the areas of energy reduction, water conservation, waste reduction, increased productivity, and improved health.

U.S. Department of Energy High Performance Building Energy Database
http://www.eere.energy.gov/buildings/database/
The U.S. Department of Energy has credited 95 building projects employing green building techniques with high performance status.  A range of building sizes, locations, and uses are represented in this list and may be sorted according to category interest.

NRDC: Building Green
http://www.nrdc.org/buildinggreen/
This website offers information on how building green can boost your bottom line. NRDC provides tips for streamlining design and construction and highlights the strategies that deliver the biggest paybacks.

 

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  • (f) 732-932-0934
  • dplotnik@rci.rutgers.edu

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Rutgers Center for Green Building | Edward J. Bloustein School of Planning and Public Policy
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