The Economics of Change: Catalyzing the Investment Shift Towards a Restorative Built Environment
The Economics of Change research project seeks to map and measure the monetary benefits of ecosystem services for real estate investment in high performance green buildings. Our multidisciplinary team is comprised of experts in the fields of ecosystem services, real estate finance, appraisal and sustainable design who are working to change the paradigm of conventional real estate investment and valuation methods by integrating complex systems analysis, ecological economics and practical market experience. Our goal is to provide new methodologies to assess, monetize and demonstrate not only the economic value, but also the social and environmental benefits inherent in deep green buildings and infrastructure.
Environmental and social benefits are currently ignored in real estate investment models. By identifying the leverage points and policies required to capture this unrecognized value and demonstrate the enhanced profitability of green buildings, we can redirect billions of dollars of available capital and catalyze the investment shift needed to create a restorative built environment.
The value captured through our proposed alternative methodologies is focused on both avoided externalities (i.e. zero impact on watershed, positive impact on human health, reduced energy costs) and positive externalities created through the restorative design principles of a Living Building (e.g. habitat/soil regeneration, elimination of toxins already in the environment, beauty, and water conservation). This Project has three phases:
Phase I funded by a Bullitt Foundation planning grant, was completed in October 2011. The goal of Phase I was to map concepts and identify a strategic plan for the project as a whole. In October 2011, Earth Economics released our Phase I report
The Economics of Change: Catalyzing the Investment Shift Toward a Restorative Built Environment. The report, which includes an accompanying sustainable investment Pro Forma Model tool prototype, provides alternatives to standard appraisal models and associated policy tools that currently do not account for the social and environmental benefits of sustainable and restorative developments.
Phase II, begun in January 2012, is focused on conducting a wide international peer review and further identifying leverage points, policy frameworks, guidelines, practices and financing structures to support the new Integrated Real Estate Investment Modeling Tool. To validate the tool, a next generation investment pro forma, incorporating multiple ecosystem services, will be created for the ecosystem services of 2-3 case study buildings. These will provide both a baseline estimate for future comparison and a deeper understanding of the ecosystem service values inherent in buildings that are designed to meet the most rigorous performance standard for the built environment, the Living Building Challenge.
Phase III will focus on implementation and large-scale adoption of the new investment models and policy frameworks with key partners locally, regionally and nationally. This work is aimed not only at real estate investment professionals and organizations, but also at municipalities, federal and state governments, organizations and interest groups, and other decision makers. A supportive policy framework coupled with an enhanced investment model has the potential to drive billions of dollars of real estate investment towards greener buildings and communities, with exceptional benefits for our local economies and ecosystems. Our vision is to transform the built landscape within the next few decades.
This project is a collaboration between Jason Twill, David Batker, Stuart Cowan, Theddi Wright Chappell, and Jason McLennan with support from Jennifer Harrison-Cox, Katie Spataro, Sarah Costello, Neelima Shah and Kate Bonaparte. We are supported by an Advisory Board of experts in financing, appraisal, development, policy and ecosystem services.
This project is made possible with the financial support of the Bullitt Foundation, whose vision and leadership is helping to shape the economy of the 21st century.