Socially Responsible Finance and Investing: Financial Institutions, Corporations, Investors, and Activists

CHAPTER 12

Real Estate and Society

PIET EICHHOLTZ

Professor of Finance and Real Estate, Maastricht University

NILS KOK

Associate Professor of Finance and Real Estate, Maastricht University

INTRODUCTION

On average, people spend 80 to 90 percent of their time in homes or offices that have to be heated or cooled, require lighting, and incorporate various energy-consuming appliances. In the United States, for example, buildings account for 71 percent of all electricity consumption (U.S. Energy Information Administration 2011). This translates into buildings generating some 30 to 40 percent of global greenhouse gas emissions. Not surprisingly, in the debate on climate change, carbon emissions, and saving resources, the built environment often emerges as offering great potential for greenhouse gas abatement. This is, for example, demonstrated in a study by the Intergovernmental Panel on Climate Change (2007) and influential work by Stern (2008).

The carbon cost abatement curve developed by McKinsey also shows that energy efficiency investments in buildings save energy in a cost-effective way (Enkvist, Nauclér, and Rosander 2007). Energy-saving can be a value-destroying proposition in some sectors because it requires more money than it saves. In the case of buildings, many of the necessary investments can readily be financed because they actually create value. The market can execute investments in energy efficiency without the need for government interference or regulation because they ...