Post contributed by Aaron Fairchild:
The same day that I received an email from a friend saying that he thought G2B Ventures just might be too early in the space and ahead of the market, I read an article in the Harvard Business Review about how, “smart companies now treat sustainability as innovation’s new frontier." There were a few articles in the September 2009 issue relating to green and sustainability. The lead article says that companies won’t grow unless they throw themselves entirely at green initiatives. I am in the thick of establishing the Efficient Real Estate Investment Fund, so naturally I tend to side with HBR over my thoughtful friend. Frankly, it is just amazing to observe how far we have come in the green and sustainability business world. We couldn’t have done what we are attempting to do in green real estate 5 years ago, but today it just makes sense.
When Harvard is saying the business world MUST go green to grow, you've got to think G2B is in the right space and at the right time, not just because we are doing good for the environment and society, but because we can make money at the same time.
Post contributed by Aaron Fairchild:
Social Capital Markets 2009 (SOCAP09) - “It’s All About the Bag”
Last week I was at a conference in San Francisco called SOCAP09. The focus was social capital markets and the eco-system of related investors and entrepreneurs. The first two lines of the SOCAP Conference Guide read, “There’s so much happening at this conference, it’s hard to know where to begin. But when you get right down to it, SOCAP09 is about the bag.” The organizers decided to highlight a bag created out of Indonesian garbage heaps as an example and symbol of what SOCAP09 is about. The bag and the business model aren’t scalable and nowhere near having the kind of volume or sales and distribution that allows for a sustainable business. In his opening address, conference organizer Kevin Jones talked at length about the bag that the XSProject created through the guidance and vision of Ann Wizer.
After Kevin finished his opening he handed the microphone to Sonal Shah, Director of the White House Office of Social Innovation. Sonal went on to discuss how the government is looking for great ideas that have the ability for scale, and spoke about the Serve America Act and the need for participation across sectors to address our social issues. Nowhere in her discussion or in the panel she was a part of after did they mention the role of for-profit businesses. They spoke to non-profits, foundations, and government programs. Finally, during the Q and A time of the panel someone asked about the role of for-profits and investment capital in search of returns as well as impacts. I thought to myself, “I flew down to San Francisco because here we are on the cusp of a massive, national and global social transformation, and it is all about the bag?” Capital and financial markets have begun investing in companies, organizations, and strategies that take into consideration social and environmental impacts, traditional economists consider these externalities that should be ignored, and it is all about the bag? Investments that account for these externalities are predicted to grow to 5% to 15% of total invested capital by the year 2015, this represents trillions of dollars, and the organizers of Social Capital Markets 2009 highlight a humble bag and non-scalable business model? I left the first day feeling skeptical if not a bit cynical.
I got to the conference early the next morning for some coffee and I ended up running into Kevin Jones. Kevin is a big, red faced man with stony-tint glasses and a very unassuming style. After the pleasantries and congratulations I learned that last year they had just over 600 participants (good for the first year), and that this year they had around 1,000 participants. I asked him where SOCAP was going, and he said they would like to have more entrepreneur grants next year and that he would like to eventually see somewhere around 1,500 entrepreneurs along with the cadre of fund managers and investors large and small. So then I asked where are social capital markets in general headed? He told me the first panel of the morning would be addressing that question. When I pushed him on my observations from the first day and the slant toward non-profits that I felt, he disagreed wholeheartedly and said that his intention for the conference was to highlight and encourage profitable solutions that considered and accounted for environmental and social impacts in their business models. He insisted that capital was flowing in larger and larger amounts in that direction as investors understood that the externalities of yesterday are not the externalities of today. Okay, okay… I decided to approach the morning’s sessions with an open mind.
I could not have been better rewarded for the renewed outlook and came to understand the symbolism of the bag. I found it astounding that the conversations I had throughout the remainder of the conference with investors, fund managers, and entrepreneurs alike often became philosophical and reflective while at the same time there was a transcendent feeling that those of us in this sector are sitting on a geyser.
Charly Kleissner talked about holistic investing and “going away from black and white." He sees investment capital moving away from “or” and to “and." Dan Crisafulli talked about enhanced transparency and larger partnerships between private and government capital as the need to “move the needle” on our social and environmental issues continued to become more intense. Amit Bouri talked about greater standards that are widely accepted by the social capital and financial community alike, such as Impact Reporting and Investing Standards (IRIS). I talked to a Canadian investment adviser about meekness and power appropriately placed.
I also had conversations with 3 other fund managers that in many ways were like listening to recorded conversations we have had within G2B Ventures and our sincere belief that we are pointing the market toward profitable investment in existing residential energy efficiency, and doing our small part to help transform the market and the world. Yet we remain humble and open to advice and dedicated to transparency, we remain optimistic, and we remain convinced that the investments made in triple bottom line ventures like ours will help change a world where economies dictate the way we all live.
On the last day of the conference they convened an open discussion designed to give participants the opportunity to suggest ways that the XSProject could be turned into a viable and sustainable business. Businesses start with a seed idea, the idea takes root and begins to sprout through the thoughtful fertilization of outside ideas and inputs, the germinated seed then grows into a business through careful cultivation, hard work and applied capital. We all understand the cycle; the difference is our determination to make a difference in a world in need of change and that we know we don’t have all the answers and are willing to ask for help. The key to SOCAP was the humility interwoven throughout the conference and the determination to learn from the mistakes of the past while focusing on profitable solutions for our environmental and social problems. I returned to Seattle with my unbridled optimism intact – the bag had done its work.
Post contributed by Sonja Gustafson, LEED AP:
This week the New York Times published an article entitled “Some Buildings Not Living Up to Green Label," discussing the energy under-performance of buildings rated with the LEED system. (BTW, LEED stands for Leadership in Energy and Environmental Design, so energy matters!) The article cites various examples of LEED-certified buildings falling short of predicted energy efficiency and notes industry criticism of the lack of accountability in tracking actual energy performance.
I’m glad to see the discussion moving this direction, as any pragmatist will tell you that it’s all about how a building performs according to its green goals, not about some shiny LEED plaque on the wall. I do want to offer two comments about this discussion, however, that provide some perspective on the role of LEED in the building industry.
My first point is that the organization that oversees the LEED system, the non-profit United States Green Building Council, is not fighting the criticism, but in the past 2 years has been tracking the performance of buildings and provided much of the data that pointed out the deficiencies. As a result, last week the USGBC launched its Building Performance Initiative, which not only tracks energy efficiency but provides feedback to building owners to help address performance gaps. It also provides outreach and education to help architects and engineers understand energy issues before they begin building design. Tracking energy performance is now part of the conversation, and I’m glad to see it stick.
My other point has to do with why a building owner may elect to get LEED certification. “Green” covers a wide spectrum, and although energy use is certainly one of the most important (and required) components of LEED, there are other ways to reduce carbon emissions in building green. For example, a building owner might choose to locate her project in an urban setting in order to provide building users/tenants greater access to public transportation and services. Or, if the building is a redevelopment, it might conserve enormous amounts of energy by using materials and infrastructure that are already embodied in the existing building. Energy use by a building might be lower if the project were built from the ground up on undeveloped suburban land, but the carbon footprint might in fact be higher than a redevelopment due to increased commuting, parking needs, and greater need for virgin materials. Other buildings may choose indoor air quality as a top priority which will require additional energy consumption in ventilation systems. Green goals matter, so looking at a green building may require looking not only at energy consumption, but at the larger spectrum of green.
I’m glad to see the scrutiny being paid to LEED’s (ahem) leadership of energy performance. This rising tide of accountability will float all boats at a new level and perhaps even generate discussion on the variety of issues that matter in green buildings.
The Green Canopy blog is written by our CEO and Culture Curator, Aaron Fairchild, as well as our staff and a few very special guests.