TEAL’s CEO, Britt Schmidtt, had the opportunity to share his thoughts on “Unlocking ESG Investment Through Monitored Infrastructure” in Forbes Business Council.

Leaders in the real estate industry are struggling to quantify their carbon footprint and working to determine the best investments to reduce it. With over a decade of experience leading energy infrastructure companies, Britt understands the importance of efficiency and the challenges of introducing new solutions into established industries. Check out Britt’s thoughts below. 

As Congress works to make climate investment a priority, federal subsidies will likely focus on green-infrastructure initiatives. I think the key to unlocking these investments will be optimizing them to projects with the most immediate impact in reaching our climate goals.

For investors who have already been propelling environmental, social and governance (ESG) initiatives, the added federal support should be welcome. The benefit isn’t only more money to help scale climate companies; more important may be the subsequent standardization of metrics and baseline goals within various industries.

While there is no shortage of initiatives deserving attention and support, I think priority will go to those with measurable results. This raises the need for solutions that can help us gauge the biggest inefficiencies across industries and how well we are succeeding. As the famous adage goes, “What’s measured improves.”

With over a decade of experience leading energy infrastructure companies, I understand the importance of efficiency and the challenges of introducing new solutions into established industries. I believe these changes don’t need to be disruptive but can instead add clear value and improve margins while also establishing baseline standards. But it’s important that we get it right at this key moment of transition.

Investing In A Climate-Forward Future

Investors today are very motivated to back up ESG-focused companies and initiatives; however, right now, that term has become a catchall without much in the way of real guidance or metrics.

I think we need to provide investors with better auditing, clearer holistic metrics and an understanding of what constitutes real ESG impact. Designing efficiency through both hardware and machine-learning software that optimizes energy consumption and then monitoring data can help slash carbon emissions and make the gains transparent and auditable. (Disclosure: My company provides these solutions.) As federal investment begins to flow into these initiatives, investors may finally get clearer terms for ESG projects.

Monitoring, of course, creates challenges for older systems in many buildings. Developers may want to embrace the use of multiple predictive inputs to optimize the energy consumption of central plants. These systems can achieve efficiency gains while producing quantifiable carbon-reduction metrics.

The underlying argument here is that if ESG investors really want to make an impact, they need to factor in the built environment. Mechanical systems are key contributors to carbon emissions. In 2014, the Department of Energy reported that about 40% of emissions were from buildings, and mechanical systems represent almost 90% percent of the total energy of a building’s carbon footprint.

ESG And The Built Environment

As we develop new environmental metrics, we need to consider their lifetime value. After all, addressing climate change is not an immediate fix but rather a continuous effort to adjust behaviors and systems for decades to come.

Mechanical systems offer an excellent example of how efficiencies can be misconstrued if you aren’t designing according to a long enough timeframe. These systems need to be built with efficiency in mind, and “efficiency” needs to be understood as the potential energy savings of the project over its lifetime.

If we are to realize the possible efficiency gains of a given infrastructure, I believe we’ll require predictive analytics. Maximum efficiency is possible through real-time analysis of weather and usage patterns, the demands of a specific building and the ability to anticipate these changes rather than just react to them.

Investors have already begun pushing back on the operators of developments that claim to be sustainable, asking for a demonstration of impact. Quantifiable data takes “sustainability” claims and backs those claims up. The carbon savings generated by an ESG investment in a given property can now be rigorously accounted for and continuously optimized.

Getting Started With Software Monitoring

Aside from making energy use a priority, business owners face the challenge of how to begin. The DOE offers useful benchmarks and goals for energy consumption, but some states are already imposing stricter regulations. Finding commercial spaces that meet these standards can be difficult, but building systems will likely be updated in the coming years. For companies in charge of their own space, however, they may want to begin these assessments now while there is still time to be ahead of the curve.

To start, look for a system that can reliably monitor and assess energy use. When choosing the right partner and IoT technologies to collect data, there are some important considerations to take into account. I think monitoring is essential, but it may not be enough if assessments do not also provide concrete recommendations to improve efficiency and the steps to meet goals.

Seek partners that can help craft customized sustainability goals for the unique built environment of the company’s facilities. One size does not fit all in this case, and any energy monitoring and sustainability program should be optimized accordingly. This includes ensuring that any monitoring solution and assessment aligns with local, state and federal guidelines and goals and specific industry benchmarks for your business.

One of the biggest questions is how well new software monitoring can be integrated into legacy systems without drastic overhauls and also whether the reports and assessments are able to take into account the overall health and longevity of the equipment. Recommendations should be tied to the equipment in use and optimizing it for efficiency in relation to the realities of the system, as well as variable climate and weather impacts throughout the year.

To overcome these challenges, assess monitoring options based on the customizability and flexibility of the reports to consider the equipment in use and the unique built environment and weather conditions. Finally, make sure that monitoring is part of an overall plan for sustainability, which includes maintenance and health of the equipment to avoid surprises.

Ultimately, sustainability begins in the boardroom: To hit our climate targets, it’s important to implement solutions that offer immediate “wins,” but these solutions need to be equally considerate of the long-term and make sense from a business perspective. By aligning the interests of investors, developers and residents, business leaders can optimize returns for both the climate and investment.