MODULE 6 – Making The Business Case for a Project & Yourself

A. A CLIENT'S POINT OF VIEW

I. Understanding the client's point of view

Real estate developers are concerned about cost, loans, and profits. The predictability of time and
construction is paramount to managing costs.

II. Decision makers are often at odds (mâu thuẫn)

As a good green consultant, you should be able to help address the concerns of each market player with
persuasive data and compelling presentations.

III. Costs versus Benefits

1. Cost is an important factor

The biggest barrier in all surveys is ‘first cost’, or capital cost (chi phi vốn) of construction.

Perception of costs and affordability (khả năng chi trả) of green buildings are much higher than reality
given falling technology costs. It is important to identify which green ideas are more cost-effective.

2. Green buildings have many economic benefits

a. Construction cost premiums minimized

+ Incorporating green measures early into the design process can keep costs to 1-3% additional costs for
green buildings

+ Passive green measures have negligible cost and can even aid construction for a net positive benefit
(lợi ích ròng tích cực)

b. Availability of green incentives

+ Projects can enjoy local incentive schemes for sustainability

+ Funds on international markets are raised (huy động) quickly and cheaply under the green brand

c. Certification providing quality insurance

Investors surveys considered this an important benefit (the EDGE certification system is an example of a
documentation and certification process that ensure quality).

d. Higher sale and rental prices

Home buyers are willing to pay more for efficient homes with lower bills
Certified green buildings can command higher sales and rental prices, with homes ranging from 4–9%
higher

Green mortgages (thế chấp) can minimize upfront costs to buyer

e. Quicker sales or rental

Certifying green can differentiate a building in the market

Data shows quicker sales turnaround

Green homes sell as much as 4 times faster

Reducing sales time can help reduce investment costs incurred by a developer

f. Lower utility bills

Operational savings might by meaningful for clients who are going to own and operate their buildings

Buyers save 15–20% on lower utility bills for green homes

g. Improved occupancy rates

Higher occupancy rates with better rents are another benefit.

h. Reduced maintenance costs

Better quality construction is a direct benefit.

i. Improved occupant health and well-being

Consider that for most companies, staff salaries are the biggest expense. These improvements indicate a
direct return on investment.

j. Higher resale values

Resale value may be more attractive for buyers who are planning to flip a building. Reducing operational
cost, in this case, helps to improve the market value of a building

The resale value of green buildings is 4–10% higher

k. Lower default rates

Financiers enjoy stronger portfolios

Banks enjoy up to 33% lower default rates (tỉ lệ vỡ nợ) from buyers of green homes
3. Cost-benefit ratio is firmly on the side of benefits

4. Tools can be useful to demonstrate the costs and benefits to clients

EDGE is an example of a tool that provides not just energy savings but also cost estimates.

B. BUILDING THE BUSINESS CASE

I. Case studies are a compelling medium

The EDGE-certified city Kesar City project in Amdavad, India is a case-in-point: It achieved 80% savings
in maintenance over benchmark costs. Despite being the largest project, Kesar City was the fastest to sell
among 14 projects which went to market in 2015 in the Maraiya region

II. What makes sense to a client?

III. Example: Business case for home buyers

1. Homeowners benefit directly and long-term

A home buyer may be facing challenges such as high energy costs; in many countries, utility bills
comprise 10% to 25% of monthly income. Some places may suffer from power cuts which make standard
homes very uncomfortable. Other places may have water shortages. Or, there may not be enough
developers developing green homes.

As a green consultant, you can highlight the following opportunities:

+ Green design can help homeowners save money on utility bills every month — for example,
homeowners can expect a reduction of 20% in utility bill costs.

+ A well-designed passive home can keep homeowners comfortable even if there is power-cut.

+ Green design can help save on the routine use of water.

2. Utility bill data can be used as evidence

When doing housing development projects, it is important to understand who the clients are and what is
important to them — bills versus thermal comfort for example. Billing data from homes in the neighboring
areas can be presented to make a compelling case.

The graph below shows sample bills from low-income homes over the course of a year. Each line
represents the monthly bills of a different home, and the red line is the outside temperature. On average,
the utility bills track the outside temperature, highlighting the impact of the climate on utility bills.

3. Green homes provide many benefits

The case can be made from many angles — different angles may appeal to different home buyers.
Comfort, efficiency, resilience, and higher resale values are all valid outcomes of building green.
 Sample design recommendations:

Adding white reflective paint on roof

and walls, external shading, roof and
wall insulation and better placement
of windows can improve thermal
comfort by 70% and lower the use of
ceiling fans and therefore save
money (~15% less in bills).

Sample design recommendations:

Adding energy-efficient ceiling fans

and refrigerators and a solar hot-water
system could reduce the current bill by
a third (about USD 80). For new
homes, this may only have an
incremental cost of ~$300 (4 years
payback).

Sample design recommendations:

Adding a solar photovoltaic system

(PVs) for a cost of ~ INR 110,000
($1453) to the package will have a
payback of ~9 years. Rooftop PVs
will make a family resilient to the
power cuts and rising utility tariff for
20–25 years. In some cases, homes
can generate income for owners if
they can sell electricity back to the
grid.
IV. Example: Business case for developers

What is the value proposition?

Speculative developers care about branding, publicity, and winning awards. In the long-term, the brand is
more valuable than the money they make from one project.

Remind developers that for a small investment, they can achieve EDGE certification and increase the
marketability of their building. They can realize brand recognition, public relations, and community
benefits.

1. Developers care about prices and sales

You can include the following benefits in your presentation:

+ Green homes have been shown to command higher sales prices and sell quicker.

+ In addition, green homes have lower bills and higher resale values.

+ Banks sometimes offer better financing where such incentives exist for green homes, allowing
developers to pay their loans back faster if they are operating the building.

2. Capex could be lower through passive design

Developers can reduce capital costs on construction and ultimately save money.
3. Savings from faster construction and sales

Alternative construction methods that save construction time (such as precast insulated panels) and
faster sales times can improve the developer’s cash flow. The savings can potentially compensate for any
additional costs of green building.

4. New business models to get past first costs

Innovative approaches and new business models can be proposed. The example below is one where the
developer installed PV panels on homes at no upfront cost.

Innovative models can be explored to install green measures without putting a financial burden on the
developer or the buyer

C. FINANCIAL RESOURCES:

I. Financial institutions:

5 reasons:
 II.

Green mortgages can help pay for green measures:

1. Green measures: create an energy & water efficient home

2. Certificates: confirm the project’s forecasted performance

3. Savings: Home buyer sees greater net income from lower utility bills

4.1. Loan increased: buyer loan increased due to higher capacity to pay

4.2. Developer gets discounted rate for improved loan performance

III. Government incentives

national, state, local, or municipal — can be another financial resource.

These incentives can come in the form of:

Tax incentives (ưu đãi)

Rebate programs (giảm giá)

Higher allowance for built areas

Expedited permitting

Discounted applications

Financial aspects are key to unlocking green design. Awareness of the project financing impacts on your
client will add significant value to your green design services.

D. THE POINT OF VIEW OF DESIGN FIRMS

I. Help position the design firm

Design firms also want to differentiate themselves in the marketplace. By focusing on green buildings,
design firms can:

Build unique buildings for the local lifestyle, using local materials

Help their clients save money

Quantify the impact of their design decisions early on

Become market leaders by using tools such as EDGE

Case study: Foster + Partners

Foster + Partners consistently frames their projects as sustainable projects. Positioning the firm’s projects
through a green lens allows the firm to get headlines in major publications, and to win international
awards.

Most large firms (cty), like Foster + Partners, have experts in areas such as hospitals, labs, or multifamily
buildings. Similarly, these firms have sustainability experts in their team — these specialists work across
any projects that aim to be green.
II. Position yourself as a green architect

1. Sustainable design is good design

consider it as an integral part of the service. Provide clients with greater thermal comfort and savings
while using durable, quality materials that suit the environment.

Using tools such as EDGE, green architects can introduce efficient performance into a building from the
concept stage without sacrificing design integrity.

2. Green architects are inspiring

By combining business sense with green technical know-how, design architects can not only have a
stronger position in the market, but they can also improve staff retention.

The younger generation is very aware of climate issues and they want to be associated with a firm that is
working on environmentally friendly features. As a green leader, you can provide more opportunities to
staff to work on green projects.

3. Energy analysis tools are becoming a part of design work

Architects use various tools to analyze their design — simple ones at the schematic stage, and more
complex ones towards the end of design. Simple tools such as EDGE can be used in all design stages.

4. You can adopt a green portfolio approach

A small but, consistent difference in an entire design portfolio is more effective than undertaking a handful
of ultra-green projects.

5. Offer to help save your clients' money

By combining design with energy and cost analysis to make the right decisions from the start, designers
can save their clients’ money, both on capital costs and even operational costs. A focus on a client’s
bottom-line and providing the quantitative analysis — a numbers-based approach — can differentiate
your services.

III. Position yourself as an advisor

Green designers can encourage the construction sector to design and build green by serving as trusted
and experienced advisors. As a trusted advisor, you can bring your skills and insights to instil confidence
that a project is certifiably green.

Advisors provide unbiased advice whether as a sole practitioner, an in-house staff or a member of an
engineering or architecture practice.
Becoming a green advisor results in greater knowledge, career growth and an opportunity to promote
work.