Vet your metrics, avoid wrong investment decisions with these Expert Questions

Metrics are important to green building finance because they can help you prove the green value-add you’re getting from your sustainability or energy efficiency initiatives.  First of all, they’ll drive the project choices that your company makes, which will determine the future state of the green finance or investment program that you’re running. Over time, they’ll teach your company how and where to improve its green investing activities because they’ll point you to the areas to improve in order to reach your business objectives.

There’s a lot riding on your choice of metrics

However, achieving that success depends on choosing the right metrics in the first place. There’s lots of evidence that getting metrics wrong can result in huge problems… once you realize that there’s even a problem in the first place and that it stems from a faulty metric.

Enterprise Group CEO John Mariotti wrote about how the medical establishment continues to accept the “normal” human body temperature of 98.6 F, even it was proven to be 98.25 F many years ago.

There’s also the expensive (and ongoing) example of the losses suffered by governments and investors that relied on the AAA credit ratings on securitized mortgage pools, which touched off a global financial crisis, when the ratings were exposed as inaccurate.

Expert Questions for vetting metrics

We help clients to vet their metrics, so that they make the right decisions about their target environmental, social and economic impacts. I condensed them into shortlist of Expert Questions for Vetting Metrics**, that I taught my grad finance class yesterday. You can use it to locate and assess potential weaknesses in measurements, preventing wrong decisions and expensive problems.

1. Who created the metric or it’s criteria?
2. How do they define value?
3. What do they want to know?
4. What will they do with the data?
5. Does the measurement and any impacts comply with the Four C’s?
6. Are chosen discount rates and sensitivity scenarios well-justified?
7. How does it drive marginal improvement in environmental quality and well-being?
8. What’s the measurement baseline?
9. How is the metric’s range of motion defined?
10. Does the metrics reporting period match the firm’s normal financial reporting period?

There’s only enough time for now to discuss a simple principle that is behind #’s 1-4. It is: forms of social / environmental measurement serve the perspective and objectives of the measurement’s creator.

Most practitioners know that it’s important to use metrics that are comparable across many firms, to get a transparent view and the right context about a company’s or portfolio’s performance.  In green investing, there are various private data collection firms compiling this information, but they may focus their data reporting on a particular sub-sector of clients. The measurements used can be less effective for you if your firm does not fit the profile of this client sub-sector.

I’ll write more on the other vetting questions from time to time, but feel free to use this list to check or recheck your own metrics or the criteria that’s behind them. When you know you’re accurately measuring green investment performance, then you’ll enjoy the benefits of better decision making and impact.

**What are Expert Questions?

Finally. A Green Building Finance Course for Non-Finance Professionals

Now you can pre-order the first ever green real estate finance course for non-finance professionals

A couple of days ago we kicked off the pre-order event for the new self-study version of the Competitive Edge Workshop 1: Communicating the Value of Green Building Using Principles of Real Estate Finance.

The first ever self-study course in green real estate finance for non-finance professionals

This all-in-one compact, dynamic course helps you communicate the value of your green building services to real estate finance and investment professionals.  It teaches you how you can present the value of your green building products and services to commercial property owners.

Plenty of in-depth, material to support your learning

• Screencasts of all presentations on DVD
• Course Pack - Study guide accompanying the presentations that provides backup information on presentation topics.
• Green Finance Research & Reference Guide - catalogs the key studies and references in the field.
• Green Finance Glossary - this is the only glossary with the most essential sustainability, real estate finance, investment and energy terms all in one guide. It simply doesn’t exist anywhere else.
• Sample Property Financial Analysis - based on an actual investment as an example of the kinds of financial analysis performed by commercial property investors.

50% price for only a couple more days

Everyone on our newsletter list gets 50% off the course when they pre-order now.  So you pay $149.95 now (vs the $299.85 regular price).  This special pricing will only last a couple more days. (If you are not on our list and buy the course now, you’ll get the 50% discount and will be automatically signed-up on our list.)

Get Free Bonus Gift

You’ll get  Financing Market Transformation, a unique collection of eight articles on the latest thinking and best practices in green real estate finance - donated by the most-respected leaders in the field, so we’re giving it away.

Learn at your own pace

This course gives you the competitive edge — everything you need and nothing you don’t

Buy the course now at:

http://www.galleyecocapital.com/green-building-resources/competitive-edge-green-finance-workshop/

Put Fortune 500 Product Innovations to Work for Your Green Initiatives

Now that the economy appears to be improving, we expect billions of dollars of fresh capital to flow into green development and energy efficiency retrofits over the coming years.

However, we also know that many firms are still hesitant to proactively green their portfolios and financial offerings. We think we know why and have new tools to boost their confidence.

These practitioners are saying something that the green building crowd simply can’t ignore. They feel they’re in a Catch-22: they know their companies are at risk if they don’t go green, but they don’t have a clear view of the possible results of committing their capital to green investments at a meaningful level.

Even though researchers have published studies indicating that green properties earn an average 3% higher valuation, or 16% higher net operating income, that still doesn’t mean that you are going to make that on your properties. It doesn’t mean that your particular tenants are going to pay you more rent on a given date. Nor does it mean that you will absolutely realize these results upon sale of your particular green assets.

The truth that leaves these firms skittish is that realizing the value-add of green depends on many variables for which no data exists. Not only must you do the right things, but the sub-market around your asset has to do (enough of) the right things, too, in order for you to be properly rewarded for your sustainability initiatives.

That’s a very hard disclaimer for many investors, lenders and governments to tell their shareholders and voting taxpayers.

So we’re stuck, right?

No, we’re not. There is a much better way.

What Real Estate Can Learn from the Fortune 500

We noticed that leading global players – players like VeriSign, SAP, Genesys, etc. – face similar issues as commercial real estate investors.

They also have the predicament of committing billions of dollars each year to create new or revamp existing products and services in an unclear business environment. The B2B product development gurus who work for these companies told us about the secret sauce of their success – what has made the difference between so-so and blockbuster products, even when the economy is tough.

It turns out that Fortune 500 companies reduce their investment risks within new/revamped product and service initiatives by using sophisticated “voice of the customer research” (VOCR) tools very early in the design process. These tools gather how customers perceive and experience their products and services, which is perhaps the most difficult information to obtain. It is also the most valuable for developing new products and services – particularly the kinds of products and services that are very new to an industry, like green building and energy efficiency.

The B2B product development gurus stressed that these techniques minimize capital at risk because the company obtains key insights up front on what might enhance their product’s success with their customers. Products and services can then be further developed to fit customers’ needs as closely as possible. Often times, these methods reveal data about unspoken or hidden needs customers have never clearly expressed, leading to innovative product breakthroughs.

Galley Eco Capital has carefully adapted VOCR tools to work specifically for the real estate finance and investment sector as well as municipalities engaged in energy efficiency and green building programs. They are available within a branch of special services called Real Estate Innovation Advisory®. REIA now offers special collaborative forums that power green initiatives by enabling investors, lenders and governments to collaborate with their customers on their green space, investments, and service offerings.

Join an upcoming Mini-forum at Competitive Edge Workshop #3

If you are attending Competitive Edge Workshop #3 on June 24, you’ll participate in a mini-version of an interactive Real Estate Innovation forum titled, What Real Estate Investors Think about Your Products & Services (And How You Can Communicate Their Value).

Whether you are a real estate practitioner, investor, service provider or government employee, you will have hands-on involvement in learning how owners perceive green building products and services. You will take away insights about interactive forums as well as specific content that is immediately applicable for your own business.

Understand Your Customers, Minimize Investment Risk and Boost Investment Value

If you don’t have the voice of your tenants, borrowers, partners and customers influencing the development of your green building space, products, services and offerings, then you are missing an incredible opportunity to bring more certainty to your capital programs. You could also miss the chance to find more breakthrough ways to do smarter green initiatives.

Call me today to talk about how Real Estate Innovation Advisory® Services can help you gain clarity about enhancing your existing products and services or get customer input on new ones.

Key events on energy efficiency finance and triple bottom line investing

Meet us at the the following events. We’ll be presenting about:

- energy efficiency financing

- responsible property investment metrics for high performance portfolios

- taking the green economy to the next level

In the weeks ahead, Lisa Michelle Galley will be featured at a number of key industry conferences. The topics covered by Lisa and other leading voices in the sustainable investment community will highlight the  latest trends and provide a valuable forum to learn about innovative solutions to some of the most pressing challenges facing the green building and finance sectors.

Presentation on Energy Efficiency Financing

GSMI -The Sustainable Buildings Series: Retrofits

October 21, 2009; 11:15am – 12pm, Mission Bay Conference Center at UCSF
Lisa will cover the key considerations for different types of energy efficiency financing.  From there she will talk about how owners can more effectively coordinate their energy efficiency financing efforts across their portfolios. Lisa will be co-presenting with Peter Liu of New Resource Bank.

Presentation on Metrics for High-Performance Portfolios

Responsible Property Investing Council: 2009 ULI Fall Meeting
November 04, 2009 – Joint session of RPI and Sustainable Development Councils
Moscone Center South, San Francisco
Along with co-presenters David Wood, of the Responsible Property Investment Center and  Jean Rogers of ARUP, Lisa will offer fresh insights and recommendations developed in a year long study of the development and application of  responsible property investing metrics on institutional real estate portfolios. Lisa and Jean will discuss how the real estate investment ‘system’ has been impacted by sustainability.

Taking the Green Economy to the next level

Sustainable Industries Economic Forum in San Francisco
November 19, 2009; 9:30am -10:15am
St. Regis Hotel, San Francisco
Lisa will join a panel of industry leaders including Paul Hawken, author and CEO of the Pax Engineering Group, to discuss some of the most challenging aspect of successfully implementing triple bottom line solutions and how we can take the green economy forward. The event will offer valuable perspective on growing strategic partnerships as a core aspect of sustainable business.

If you would like to meet us at any of these events, please email us info@galleyecocapital.com

News about future events is available through our website.

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• Sign up for our list on our green finance training page, to get info on upcoming workshops, which go deeper into the green business case.
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• You can contact us to discuss or initiate a project here.
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• Photo credit: Flikr/manu chao by Michale.

Galley Eco Capital helps Helsinki to reduce carbon emissions

San Francisco-based sustainable finance consultancy Galley Eco Capital was announced as part of a winning team for the redevelopment of the Jatkasaari district in Helsinki, Finland, which will be an urban zone with low or no carbon emissions.

Sitra, the innovation agency of the Finnish government, revealed today that the winning team for their “Low2No” development design competition was made up of Arup, Saurbruch Hutton, Experientia and Galley Eco Capital. The multi-national team was selected out of 74 initial entries, for their “C_life – City as Living Factory of Ecology” project.

Galley Eco Capital  brings their unique perspective as an international sustainable finance consultancy with a focus on creating green and socially responsible finance and investment programs.  Galley Eco Capital’s work complemented the architectural and consumer behavioral aspects of Jatkasaari by contributing new ways for finance to transform both the district and Helsinki market, to positively impact people’s lives.

The competition jury stated that the innovative monetary/economic model presented contributed significantly to the team’s clear top-down as well as a bottom-up strategy for leveraging the Jätkäsaari opportunity, in the spirit of the Low2No challenge.

Sustainable finance for Jatkasaari and Helsinki

While other team members devised the design, energy and consumer behavioral strategies for the project, Galley Eco Capital’s responsibility was to create an economic and funding model, which would support the project by integrating traditional and socially-responsible capital sources and products at a regional market level and set the right incentives to achieve maximum effect in terms of emissions reduction, energy efficiency and resource savings.

Starting with a thorough analysis of Sitra’s environmental and socially-responsible real estate objectives, the Finnish climate change agenda, and Finland’s participation within the global environmental finance markets, Galley Eco Capital developed ways to create a reliable pipeline of green mortgage, environmental, energy and carbon finance capital for Jatkasaari.

These products would all seamlessly connect with the traditional Finnish financial network to form a holistic financial system. Delicate synthesis was also required to create a flexible market structure, which would monetize available sustainability benefits while adequately funding the Jatkasaari project throughout construction and operation.

About Galley Eco Capital

Using their expertise in designing and implementing sustainable finance and investment programs, Galley Eco Capital’s strategies help investors, lenders and regional governments to bridge traditional with green finance and efficiently monetize the available sustainability benefits embedded within their real estate and renewable energy initiatives.

Galley Eco Capital’s unique approach assures more successful solutions through the application of interaction design principles, driven by culturally-aware, user-centric perspectives and underpinned by long years of international real estate and capital markets experience.

The strategies help drive positive change by:

• developing debt and equity financing structures based upon the value-add contributed by sustainability and energy efficiency,
• synthesizing traditional with emerging green financial products into holistic financial solutions,
• sourcing and structuring incentives and government subsidies to offset program costs,
• designing and monitoring sustainable investment performance measurement to assure positive program impact

Over the next 6 years, the Jatkasaari district will be designed, constructed and opened to the public. From there, the sustainable ideals that govern its day-to-day life will act as a model and example for the rest of Helsinki, Finland and the world. Through Galley Eco Capital, San Francisco will be a vital part of this journey.

For more information on the Low2No project, or on Galley Eco Capital, contact Lisa Michelle Galley, Managing Principal, at +1 415 655 6668, or via email at “lisa at galleyecocapital dot com”.

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