Landscape Performance Research: The Economics of Change

By Jason Twill, LEED AP and Stuart Cowan, PhD

The built environment and building industry together account for about 50% of U.S carbon emissions and contribute to a web of significant, interconnected problems: climate change, persistent toxins in the environment, dwindling supplies of potable water, flooding, ocean acidification, habitat loss and more. Over the past decade, great strides have been made in terms of energy efficiency, water and waste consumption, and sustainable materials, and a critical mass of innovative professionals has emerged.

Yet a major barrier to the broad adoption of advanced green building practices is our 20th century real estate financial system. Current lending approaches, appraisal protocols, and valuation models do not reflect the true externalized costs of doing “business as usual” nor do they fully capture the additional environmental and social benefits created by building green. These barriers affect the perceived financial viability of environmentally sound projects and slow innovation and market growth. To fully realize true sustainability, a shift in assessing and evaluating real estate investment is urgently needed.

The Economics of Change is a groundbreaking effort to do just that.

The overarching goal of The Economics of Change is to shift mainstream real estate practices to document the full value of a built environment that is compatible with healthy, natural systems. Correcting real estate incentives and improving financial models will shift investment toward buildings and infrastructures that are financially rewarding, resilient, socially just and economically restorative.

A project's integrated value includes its traditional market value AND the environmental and social value it provides. This research seeks to shift the investment barrier to the right through recognition of integrated value, potentially unlocking a trillion dollars of investment towards restorative building.

In the first phase, The Economics of Change team created a prototype tool to demonstrate how the ecological and social benefits of green buildings can be monetized in real estate investment models. The Phase 1 report The Economics of Change: Catalyzing The Investment Shift for a Restorative Built Environment provides an overview of ecosystems services that can be applied to the built environment, an analysis of current and future real estate investment frameworks, and a description of the prototype tool.

Phase 2 will expand and pilot the tool in an interactive and open-source format while deepening ties to leading practitioners within the financial industry to leverage the shift from theory into action. Next steps include researching and assembling economic case studies of a select group of high-performing developments, including completed Living Building projects to identify cost data, economic models, environmental/cultural/social benefits realized and analyze costs/benefits.

With the real estate market on the verge of recreating itself, the time to align valuation models with energy policy and to integrate ecosystem services into the economic framework is now. This is a bold project, but we believe that the world needs more bold ideas, and an overhaul of what we value and how we value is at the heart of the paradigm shift we need to move towards a restorative future.

The multidisciplinary research team behind The Economics of Change comprises experts in the fields of ecosystem services, real estate finance, appraisal and sustainable design. The International Living Future Institute serves as the lead agency on this project. Jason Twill is the originator of The Economics of Change project and President of Systems Economics LLC. Stuart Cowan is a research team member and the co-founder of Autopoiesis LLC. For more information, contact Richard Graves, Executive Director of the International Living Future Institute at richard.graves@living-future.org.

Landscape Performance Research: The Economics of Change