Online teaching is taking a flight, and Matt Kahn (UCLA), who is leading the way in environmental economics, has just launched a lecture series. This is a great source of (free) knowledge, and knowing Matt, it will be fun!!
This is an exciting week for sustainability and finance:
- The Annual NAREIT Conference (convening all US listed property companies and their share/stakeholders) is taking place in San Diego, and today Steve Wechsler, the NAREIT CEO, handed out the "Leader in the Light" Awards to 11 REITs invested different property types. The Leader in the Light Award is based for 70% on the GRESB scores of REITs, and for 30% on an additional supplement. With the help of judges from Cornell/USGBC/DOE/RealFoundations, we objectively ranked the 36 companies that submitted data. The press release is here.
- Also today, NAREIT/FTSE/USGBC announced the launch of a green property index, based on the methodology first used in my academic paper "Portfolio Greenness and the Financial Performance of REITs". In the Index, those REITs with the highest fraction of green-labeled properties (Energy Star and LEED) will receive the highest weight, providing investors with the opportunity to gain exposure to those REITs that are (presumably) better future-proofed, have stronger cash-flows, and face a lower risk of obsolescence. More details in this press release.
During yesterday's International Day @Greenbuild, we had a great panel of institutional investors, representing about $164 billion (!!) in assets under management. My friends from Tishman Speyer, Prudential Real Estate, Oxford Properties (an OMERS company) and APG Asset Management did a great job informing the audience of more than 400 delegates on how they integrate sustainability in their investment portfolios. Livestream will follow soon! And here are the slides of the session I did with Fannie Mae and Wells Fargo:
Every man needs his rest. And so I recently found myself in Africa, trying to forget about energy efficiency. But even on holiday, that’s more difficult than it seems: to my excitement, nearly every house in Mauritius was equipped with good-old solar geysers.
And solar PV is rapidly making inroads, with current payback periods at just 8 years. Some other observations: the island would benefit from a recycling system, buses that drive on natural gas rather than diesel, and there is a nascent market for eco-tourism (swimming with dolphins was certainly the highlight of the trip). While reading my way through Richard Branson’s latest “novel,” Screw Business As Usual (which is not nearly as entertaining as his first book, “Screw It, Let’s Do It,” but certainly a worthy description of business that have successfully embedded environmental and social sustainability into their business operations), my thoughts would wander back to the beginning of my trip to what the Economist once dubbed “The Lost Continent” (well, sometimes even The Economist can be wrong).
After the Energy & Cities conference in Boston (see previous blog post) I headed to Cape Town for the annual convention of the Green Building Council of South Africa. 20hrs of travel later I discovered that my bag had not been able to keep up with me, but I managed convincing my cab driver to ask his wife to wash my sweaty shirt, and the next morning he indeed showed up at 8am... Unshaven, but freshly smelling, I first enjoyed the talk of Jerry Yudelson, who gave a great speech about the actual performance of green buildings (his talk was fittingly titled “If It Does Not Perform, It Is Not Green”). I then started my presentation with some amazing numbers, glanced from “The Rands and Sense of Green Building” (send me a note for a free copy): the average energy price increases in South Africa over the past four years. 2008: 27.5%, 2009: 31.3%, 2010: 24.8%, 2011: 25.8% (inflation was about 5% in the last two years, 6% and 10% in the two years before). As a matter of fact, ESKOM, the national utility, had just announced the expected price increases for the next three years: some 16%/year. Those numbers resonate with building owners and occupants – energy is rapidly becoming a significant operational burden. Needless to say, my meetings with the Government Employees Pension Fund (GEPF), Old Mutual and some other major real estate investors, discussing the relevance of sustainability for their portfolios, went quite well.
There is no doubt that energy efficiency is squarely on their minds.
Unrelated to sustainability, but when I left South Africa after nearly a week in Cape Town and Joburg, I felt confused. This time I mainly saw the “rich” areas. Eating in Cape Town’s great restaurants, taking the impressively efficient Gaudtrain into Joburg, visiting buildings that can vie with the latest developments in the US or Europe, one gets an impression of a very Western, well-developed, equal society. But walking on the streets, staying in the gated communities and seeing the endless slums (subsidized solar geysers abound – apparently some rogue equipment installers offer poor residents cash money for the geysers. Being needy in the short term, some fall for this trap…), the extreme differences in wealth become immediately apparent. You can feel the clear black-white divide, 20 years after the Apartheid ended. Fifty percent youth employment suffocates a generation of talent. And you wonder where this society will go – the Economist wondered about that recently as well.
It’s been nearly half a year since my colleague John Quigley
passed away, but we revived his many scientific contributions in a recent
conference at the Lincoln Land Institute – Present and Retrospect: The Work of
John M. Quigley. The first day of the conference was on “Energy Efficiency and
Cities,” and many great papers were presented:
Erin Mansur had a great paper
on the productivity effects of electricity shortages, using data from China (“Sandy”
recently made clear how severe the impacts of electricity shortages can be…)
for a better understanding of the effects of urbanization and GDP growth in
developing countries on energy demand was presented by Catherine Wolfram.
According to the paper, assumptions by the IEA underestimate increases in
energy demand from GDP growth, as the income-elasticity of demand for household
appliances (fridges, ACs, etc) is different for households that go from poor to
less poor, than for households that go from middle to upper-class (“pro poor
Hunt Allcott presented a follow-up
paper using the now well-known O-Power database. The big question that many
economists have is whether “nudges” in the form of information provision (how
much energy do you consume relative to your neighbors) have a persistent
effect. The answer according to Hunt is: yes. Households seem to learn from
repeated nudges – consumption drifts upwards a little while after each nudge,
but after a series of nudges, consumption remains significantly lower, even
when the provision of information stops. Small caveat: these effects are REAL
small. So, this is really the last bit of efficiency that can be scraped out of
Not building-related, but important for the
general impact of cities is the response of consumers to gasoline price
changes. Ken Gillingham presented a very
impressive paper using incredible microdata on miles driven by consumers in
combination with information on price shocks in petrol prices.