Bank of America, TIAA-CREF, and CalPERS oh my!

These are just a few of the institutional investors that are proactively focusing on energy efficiency as the market has begun to recognize the lucrative returns in this asset class.  Last week, Bank of America announced a $55 million program that will work with community development finance institutions to promote retrofits of old buildings.

Bank of America’s commitment to consolidate and analyze the data from the retrofits is just as important as the funds that will get the company there.  More data, as we cited in our last energy efficiency financing blog, will bridge that knowledge gap between engineers and investors, reduce perceived risk and thereby promote more capital entering into the energy efficiency arena.

On the heels of the Bank of America announcement, Pensions & Investments magazine released a review of the real estate management industry.  Among others, it cites that TIAA-CREF Global Real Estate reduced energy consumption by 11.5% in its office portfolio and 10.8% in its multifamily portfolio, leading to $12.5 million in annual energy savings.  Not to be outdone, Jones Lang LaSalle cut energy costs by $128 million last year.

The article further emphasizes that an important driver in this activity is the demand from significant institutional investors such as California Public Employees’ Retirement System (CalPERS) and California State Teachers’ Retirement System (CalSTERS).  We believe that CalPERS and CalSTERS recognize what EDF Climate Corps and Green Return projects demonstrate: it makes cents (pun intended) to invest in energy efficiency.

EDF Climate Corps fellows have identified $91 million in investments to date that would yield a whopping $439 million of savings in net operating costs.  Our Green Return project with KKR has yielded $35 million in energy efficiency savings across 7 of KKR’s companies through no or low cost investments, an approach that KKR is now rolling out to its entire portfolio.

We are encouraged by this trend and expect that this is just the beginning as investors increasingly realize the low risk/high return combination provided by energy efficiency.  Don’t be left behind!