David Gottfried founded the USGBC in 1992 and its work ignited the spark that became the green building movement. Later, he was instrumental in founding the World Green Building Council, as well as his own company Regenerative Ventures, which assists green technology start-ups (see box – beyond the USGBC).
The Green Building Councils worldwide
The World Green Building Council (WorldGBC) was formed in 2000 with 8 countries in attendance at a founding meeting in California: the Green Building Councils (GBC) of the US, Australia, Spain, UK, Japan and representatives of the United Arab Emirates, Russia and Canada. Currently, there are 28 national GBC members or associated groups plus another 18 emerging or prospective national GBCs.
LEED: a definition
LEED (LEADERSHIP IN ENERGY AND ENVIRONMENTAL DESIGN) is a point-based system, and a building can accrue points towards a LEED certification in various categories - such as:
The number of points the project earns determines the level of LEED certification the project receives in four progressive levels: Certified, Silver, Gold and Platinum.
To date, over 6900 buildings or operations have been LEED-certified, almost half of homes alone. The USGBC reports that there are now 1241 LEED buildings certified at the silver level, 1242 LEED gold certified buildings, and 211 LEED platinum certified buildings.
Since the USGBC released its first LEED certification tool for new construction in 2000, LEED certification tools have been developed for an additional 7 categories. In addition to commercial buildings, there are certification tools for existing buildings, schools and homes.
Furthermore, two LEED tools were designed to work hand-in-hand in office or institutional buildings, designed for tenant leasing. One tool is core and shell for building owners, and the other is for commercial interiors, designed for the specifics of tenant spaces that are leased by tenants. There are also LEED tools for retail space and for green building operations and maintenance.
REGREEN for residential remodeling guidelines is the USA's first set of resources and tools for green home remodeling projects. The USGBC partnered with the American Society of Interior Designers on the development of these guidelines.
LEED for neighborhood development is a new rating system under development that integrates the principles of smart growth, new urbanism and green building into the first national standard for neighborhood design. It is being developed by the USGBC in partnership with the Congress for the New Urbanism and the Natural Resources Defense Council. It is currently in pilot and is expected to launch in early 2010.
The WorldGBC is a union of national Councils, with a 9-member board of directors whose mission is to “accelerate the transformation of the built environment towards global sustainability”. The primary job of the WorldGBC is to formalize international communications, help industry leaders access emerging markets and provide an international voice for green building initiatives.
A Secretariat was established in 2007, and it is directing the WorldGBC’s efforts from a LEED (see box – LEED: a definition) Gold building inside The Living City Campus near Toronto, Canada. The Campus is owned and operated by the Toronto and Region Conservation Authority – a 50-year old organization with a long history of environmental conservation.
The world marketplace is huge, begins Gottfried. “I was in China recently and met with the China Global Building Council. The executive vice minister of construction does care about efficiency – there’s been a 50% improvement in 10 years, and they also have stimulus money”.
China’s GBC has a three-star rating system, with 300 registered LEED buildings.
“It’s the same in India,” he adds: “There are thousands of LEED projects there. What we’re playing in, how we live, if we will live...it’s just a starting place. We’re waking up and the equation creates fresh air and fresh water.”
And then there’s the USGBC, which was Gottfried’s driving force in the USA. “In 1992, when we first met to form the USGBC,” Gottfried says, “we had a dream of consolidating the building industry.” And did he succeed? Well, today there are 20,000 member companies and 78 local chapters and affiliates. The USGBC is guided by a 25-member Board of Directors drawn from its diverse membership.
Industry-led and consensus-driven, members of the USGBC include building owners and end-users; real estate developers; facility managers; architects; designers; engineers, general contractors; subcontractors; product and building system manufacturers; not to mention Government agencies and non-profit organizations. And over 10,000 members are engineering and architectural firms.
The challenge – and opportunities – for Green Build
The Worldwatch Institute has reported that buildings use 40% of raw materials globally – a staggering 3 billion tonnes each year.
And in the USA alone, buildings represent 38.9% of the primary energy use (this includes fuel input for production), according to the Energy Information Administration. To add to this, according to Gottfried, there are 250 billion ft2 of inefficient buildings, again in the USA alone. The US construction market accounts for 13.4%, or almost US$1.8trn, of the US$13.2trn US gross domestic product, according to the Department of Commerce.
“We have about 7bn ft2 playing in our game at USGBC and LEED,” said Gottfried, referring to the more than 28,000 registered commercial LEED projects which are building and retrofitting for certification in all 50 states of the USA and 106 countries.
And these numbers are projected to increase, according to the influential building trade publication, McGraw-Hill Construction, which reported that the green building market in both the residential and non-residential sectors will increase from a range of US$36bn to US$49bn in 2009, and then US$60bn by 2010, and in a range of US$96bn to US$140bn by 2013. A big opportunity indeed for those entering the market.
Government is a big player in green building. Local, State and Federal initiatives are major drivers behind the growth of green building, said Gottfried. Local Governments are making green building happen through their regulations, he continued. In San Francisco, for example, if you plan to build to LEED Gold specifications, you can go to the front of the permit line.
In Las Vegas, the MGM Mirage City Center won a US$200 million tax credit for building to LEED silver specifications. Four other states have similar, if slightly less-generous tax credits, Gottfried said.
Getting the money in
According to Gottfried, green building and green technologies create a bridge. But it hasn’t always been like that. Venture capitalists were not interested in green buildings when the USGBC first introduced its LEED rating system in 2000. “But they are waking up”, Gottfried said. There are now more than 30 Series A fundings of green buildings, products and technologies such as window chromatics, sustainable building materials and heat recovery systems.
And a study by the University of California Energy Institute (see later) reported that the investment community has embraced the concept of “socially responsible” investments (SRI) with enthusiasm.
The number of SRI mutual funds has grown rapidly, the authors found. SRI assets under management increased from US$639bn in 1995 to US$2.71trn in 2007.
Greentech Media Research found that total venture capital investment in green technology this year alone stands at US$3.9bn – the second best year for greentech VC investing, following on from a high in 2008. A large factor in a significant third quarter boost was the US$1 billion in funding awarded to clean energy projects from the American Recovery and Reinvestment Act. This third quarter showed US$1.9bn invested in 112 deals following a weak first quarter, and a second quarter with modest growth.
Beyond the USGBC
David Gottfried founded Regenerative Ventures to partner with entrepreneurs and seasoned corporate management teams, helping them to establish and achieve goals in the sustainable building arena. Regenerative Ventures is currently working with:
Of that third quarter VC funding, green buildings got US$104.5m with three deals. Green materials saw investments of US$100.3m with 6 deals; lighting, US$46.6m with four deals; and green information technology, US$41.2m with three deals.
However, while these figures look promising, this activity was actually outpaced by other “green” investments – first in solar projects (US$575.5m); then biofuels, gasification and cleaner coal deals (US$512.8); followed by demand response and smart grid projects ($159.7m).
Greentech also reported that more than 35 investment deals came from outside the USA, with a large number originating in the UK and France.
Independent views – so why is LEED proving so popular?
Two studies released by the University of California Energy Institute in August and September 2009 underline the reasons for the popularity and success of USGBC’s LEED certification process.
In the first study, Doing Well by Doing Good? Green Office Buildings by Eichholtz, Kok & Quigly, the authors found that green office buildings, with either a US Environmental Protection Agency Energy Star or LEED certification, actually command a premium in rental rates and sales prices over conventional office buildings. Occupancy rates are higher and less volatile than rates in commercial office buildings without a green label.
Climatic factors and thermal attributes of green buildings explain some of the reason for the rental and value increment, but in the second paper, Why Do Companies Rent Green? Real Property and Corporate Social Responsibility, the same authors argue that along with economic profitability and improved employee well-being, “a green corporate headquarters and the use of green space in general, may signal to stakeholders and customers that a firm has a long-run commitment to a corporate social responsibility policy.”
This translates into an improved reputation, attracts and retains employees and customers and, “by voluntarily accepting higher environmental standards now, firms can anticipate future legislation and avoid the risk of costly adjustment later.”
The authors analyzed data on more than 3,100 tenants in 1,180 green office buildings and on a control sample of approximately 8,000 tenants in 4,000 conventional office buildings. They concluded that substantial numbers of firms in oil and financial services industries are among the largest occupiers of green office buildings. Right behind them were mining and construction companies and Government (and Government-related) organizations, which were described as “systematically more likely to lease green office space.”
For developers and investors, the authors wrote, “the findings...have important implications. The higher initial outlay that may be needed for a newly-developed sustainable office building, or for the refurbishment of an existing office building, can be recouped through energy savings and lower risk premiums or through higher net rents.”