Article | 2013

The missing link: Transforming deep retrofits into financial assets

By  Roy Torbert

Deep retrofits—those saving 50 percent or more energy and achieving superior sustainability performance—are valuable yet largely untapped financial assets. This paper describes how to calculate all the value propositions of deep retrofits, enabling such investments to take their proper role as a central driver of company performance. Many comparisons have steadily improved the energy and sustainability performance of their buildings, primarily to minimize operating costs and keep pace with changing codes and standards. Many also have been searching for financially viable approaches to expand sustainability efforts to meet growing customer, employee, and investor demand, but have struggled to link deeper energy/sustainability retrofits to attractive financial performance. This paper presents the missing links: how to calculate and present the value of deep retrofits of corporate real estate. The deep retrofit value model for corporations consists of nine ‘value elements’ organised around a traditional business valuation framework that starts with an evaluation of retrofit property costs and risks, and then details how a deep retrofit affects business costs, revenues, and risks. If implemented broadly, corporations will enhance their competitive position and financial performace while helping to transform global energy use to create a clean, prosperous, and secure low-carbon future.