Some basic tips for using sustainability to drive shareholder value, such as the importance of lifecycle metrics and being deliberate.

1. The business of
sustainability
Michael Jordan, EVP
Jones Lang LaSalle
January 2014
Michael.Jordan@am.jll.com
@thetravellingmj

2. Michael Jordan
Bus Driver, Waiter, Internet Entrepreneur
Public Policy IT Communications Six Sigma Business Ops
U.S. Congress Bracewell
DC
IT
CONSULTING
Sun Micro
Louisville
Univ. of Oregon
Corp RE
JLL
Oregon
Colorado
Palo Alto
^ Glacier National Pk.
MBA
Chicago

3. • Global service provider
• Green building, energy, and
sustainability management
consulting services
• >150 LEED certifications
• Energy services to >20,000 facilities

4. The physical layer of the corporate
ecosystem

5. The system is subject to important
constraints
5

6. Systems approach
Why
The Natural Step 5‐Level model
6

7. The JLL Approach
To deliberately combine sustainability strategies and
drivers of shareholder value for maximum benefit.
Goal is to move the big needle.
7

8. Drivers of shareholder value
Profitability
x
Capital Efficiency
‐
Cost of Capital
x
Economic value
Growth
+
Real Options
Strategic value
Market Confidence
Make products greener
Lead by influencing business context
+ / ‐
Intangible, direct influence on stock price
Build brand and culture
Open new markets
Improve operations
8
Shareholder value
Manage risk
Source: “The Sustainable Company”, C.Laszlo, 2003

9. Existing building must be part of the solution
Nearly 75% of the U.S. commercial building stock is over 20 years old.
U.S. Commercial Building Space By Age
14,000
Million s.f. of Commercial Building Space
12,000
10,000
72% of the commercial building stock
was constructed before 1990.
8,000
6,000
4,000
2,000
0
Before
1920
1920 to
1945
1946 to
1059
1960 to
1969
1970 to
1979
1980 to
1989
2000 to
2003
Year Constructed
Source: EIA data - http://www.eia.doe.gov/emeu/cbecs/cbecs2003/detailed_tables_2003/2003set9/2003pdf/c3.pdf
9

10. The new gold standard is green
Recognized throughout the world
3.8 million visitors per year
102 stories and 2.8 million square feet
CO2 emissions of 24,000 tons per yr
The Empire State Building, an iconic,
pre-war trophy office building, can
catalyze change by cost-effectively
reducing greenhouse gas emissions
while attracting world class tenants.
$11 million in annual energy costs
Peak office building demand of 9.5 MW
88 kBtu per SF per yr for the office building
10

11. The Business Case
$500mm capital improvement program
Capital Budget Adjustments for Energy Efficiency Projects
Total ESB Capital Budget (million $)
120
100
80
60
40
20
2008 Capital
Budget for
EnergyRelated
Projects =
$93m+ 0%
Energy
Savings
Sum of adds /
changes / deletes =
+$13m
New Capital
Budget w /
Efficiency
Projects =
$106m
+ 38% Energy
Savings
0
11

12. Key findings
ESB can achieve a high level of CO2 and energy reduction cost-effectively.
A solution that balances CO2
reductions and financial returns
is in this range.
There are diminishing (and
expensive) returns for
greater efficiency.
12

13. Corporate sustainability strategy is
influenced by multiple stakeholders
Executives
NGO Interest Groups
Competitors
Customers
Education & Research
Investors
Suppliers
Media
Employees
Governments
Regulators
15

14. Source: OgilvyEarth Research (2011
17

15. Institutional Investor Requirements Overview
• Transparency and disclosure of policies (of everything) is what SRI-focused
institutional investors look for from any company, regardless of industry
• When considering the banking industry, SRI-focused institutional investors
look for a strategic analysis of climate change and climate opportunities:
- Consideration by the company of its regulations, competitive and physical risks which
would impact the company, its supply chain, the market in general and possibly its
reputational risk.
• One of the biggest issues that SRI-focused institutional investors now look
at is green financing
19

16. Example Drivers of Value from Current ESG Programs
Annual Cost Savings
Annual Revenue
1.
1.
Energy
Reduction
Brand @P/E = 10
Intangible, direct influence on
stock price
Community
Development
Banking
1.
Managed risk
2.
LEED
Certification
3.
Competitive
Profile
4.
Employee
Engagement
2.
Digitization
3.
Air Travel
Reduction
2.
Wind
3.
Solar
Facilities
Reduction
4.
Green Banking
Products
4.

17. Drivers of shareholder value
Profitability
x
Capital Efficiency
-
Cost of Capital
x
Growth
+
Real Options
Strategic value
Market Confidence
Make products greener
Lead by influencing business context
Economic value
Shareholder value
+/-
Intangible, direct influence on stock price
Build brand and culture
Open new markets
Improve operations
Manage risk
21

18. Some observations for business leaders
1.
Know what drives shareholder value for your company and make the business
case from there
2.
Use lifecycle financial metrics such as NPV (as opposed to payback or first cost)
3.
Know enough about the science
4.
Be deliberate
5.
Make an impact
6.
Do more good not just less bad
Organizations I like:
ecoDistricts
The Natural Step
Net Impact
Ceres / INCR
22

19. The business of
sustainability
Michael Jordan, EVP
Jones Lang LaSalle
January 2014
Michael.Jordan@am.jll.com
@thetravellingmj