NYU Schack Special Report: The Business Case for Sustainability

By Samantha Goldberg

The uncertainty surrounding the new administration remains prevalent across industries, including real estate. The green building community in particular has its concerns about environmental policy, and several leaders in the field expressed their views for the future of sustainable real estate at the NYU School of Professional Studies Schack Institute of Real Estate 6th Annual Conference on Sustainable Real Estate.

While any advancement in environmental policies that encourage sustainable development at the federal level might seem unlikely, including the potential that the Clean Power Plan could be overturned, there is reason for optimism at the state and local level, said Danielle Spiegel-Feld, executive director of the NYU School of Law’s Guarini Center on Environment, Energy and Land Use Law, to kick off the conference.

“There’s an increasingly compelling economic argument for continuing the transition toward a clean energy economy and there’s an increasingly large number of stakeholders invested in seeing that transition through,” she said.

State and local jurisdictions have enacted innovative policies that encourage sustainable development and improving the efficiency of our buildings. San Francisco recently passed an ordinance requiring  30 percent of roof space be set aside for either green roof or solar installations. In December, three major cities—Denver, Los Angeles and Orlando—also passed new benchmarking ordinances.

New York City is leading the pack as well, joining other cities in committing to an 80 percent reduction in greenhouse gas emissions by 2050, and improving buildings’ energy efficiency will be a major part of the efforts to reach that goal.

The city council and the mayor last year cut in half the minimum threshold requirement for benchmarking. Beginning next year, all buildings 25,000 square feet and above will have to benchmark instead of just buildings 50,000 square feet and above.

However, “there’s still a lot more that can be done,” Spiegel-Feld said. “There’s a lot that New York City can do to lead and I think history shows that when New York City adopts a policy, other cities follow and I hope we’ll do so.”

Association Advocacy

In addition to state and local efforts, real estate industry associations can advance their programs and advocacy for sustainable development. Representatives from BOMA International, National Institute of Building Sciences (NIBS), The Association for the Improvement of American Infrastructure (AIAI) and Urban Land Institute (ULI) shared their efforts during the conference’s first panel of the day.

BOMA focuses on how it can lead its members toward the “next generation” of strategies, which includes folding in principles of sustainability in everything they do, noted John Bryant, vice present of advocacy, codes and standards. Member education is particularly important, and BOMA offers programs that train manages to think more about efficiency in their operations, maintenance and retrofits.

The unique BOMA 360 Performance Program also awards buildings that are outperforming across all areas of operations and management.

BOMA is now working on addressing the next challenge for its members, asking, “what is the next generation of sustainability?” Bryant said.

One focus is on water and waste reduction, and BOMA is looking for ways to challenge its members and provide them with the resources to track and benchmark their performance “as a broader component of sustainability,” he noted.

Another major focus for industry organizations is resilience. NIBS was one of about 40 organizations that signed the Industry Statement on Resilience to show “all administrations that the building industry is unified on this particular point,” said Henry Green, president of NIBS. From the design to construction to operations and reuse, resilience is a key topic of conversation.

NIBS also works with several federal agencies to look at how their buildings operate and perform and identify areas for improvement, and conducts various studies. A study it’s currently working on focuses on how private sector investment in mitigation activities not only provides protections from hazards and improves the productivity of buildings, but can also result in a positive ROI.

All of its efforts “give us a strong sense of how we can look at buildings and make sure we’re designing and operating them to be more efficient,” Green said. “Across our organization there are a whole number of programs that have brought about significant progress from green to sustainability and now resilience. This is an opportunity for us to make sure that we operate our buildings in a manner that is proficient, efficient as well as opportunistic in terms of how we approach the building environment.”

Discussions about resiliency are also important to AIAI members, said Executive Director John Parkinson. AIAI members often think about the lifespan of their buildings and how what they build today is going to affect the next generation that’s going to manage the building.

“We want to make decisions that are going to affect what happens not next week, but the next lifecycle of that asset,” he said. “We’re at a unique time where we have an opportunity to transform the landscape that we’re all a part of.”

ULI, another major sustainability advocate, has also been reviewing its sustainability efforts, which can be a challenge for a “broad spectrum organization,” said Global CEO Patrick Phillips.

If a program’s focus is too broad, it diminishes the value of the impact, he said. Recognizing this, ULI took on a new strategic plan for its Center for Sustainability, which will soon be known as the Center for Sustainability and Economic Performance.

“We wanted to find ULI’s distinctive voice…the resulting strategy focuses on what we’re calling the business case,” he said.

ULI identified five dimensions of the business case for sustainability, including market competitiveness, accessing capital, risk management (or future proofing), project execution, and operations management and performance.

ULI has adjusted its centers’ programs to fit this new strategy. One main focus is on building performance. Its Greenprint Center participants agree to contribute their building performance data to ULI’s data management platform on energy, waste and water. The participants also have committed to reduce carbon emissions by 50 percent by 2030 and are on track to reach the goal, Phillips said.

Other focuses of its programs include improving the energy efficiency of tenant spaces, bringing urban resilience strategies to the local level and public health.

Business Case Basis

All of these efforts and advancements in sustainability were largely driven by the business case for it and “because it was the right thing to do,” not because of government intervention, Bryant emphasized.

“Building owners and managers all realized that they could save money from doing the right thing and who wouldn’t want to do that?” he said. As technology has improved and the industry has matured, “it’s been much more ingrained in everything we do and it’s no longer a movement but a core component of real estate.”

However, he and the other panelists acknowledged that partnering with government agencies and other industry organizations is necessary to continue making progress on sustainability and resiliency in real estate.

“Productive business-government relationships are essential to our long-term health and prosperity,” Phillips said. “I think we’ll see glimmers of that emerging in the coming months.”