Transcript CMP Summary Slides

Sustainable Investment Initiative
Green & Climate Neutral Buildings
Green Mortgages
Green Building Securities
Green Building Underwriting Standards
Reduced Risk & Higher Valued Collateral
Cheaper Cost of Capital / Increased Liquidity
Certified Sustainable Product Investment
Improves quality of life
FSC Certified Wood Stops Illegal Logging &
Irreversible Dangerous Climate Change
Supported by Energy, Bank of America & Anonymous Foundations,
Federal Home Loan Bank & CMP Partners
Capital Markets Partnership (CMP)
–
Partial List
City of San Francisco
City of Chicago
City of Dallas
City of Denver
City of Miami
City of New York
City of Oakland
City of San Jose
City of Santa Monica
City of Seattle
Learning From History
FDR’s 1933 Inaugural Address
Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen.
Government of all kinds is faced by serious curtailment of income; the means of exchange
are frozen in the currents of trade. More important, a host of unemployed citizens face the
grim problem of existence.
This nation asks for action and action now. We must act and act quickly. We must
move as a trained and loyal army, willing to sacrifice for the good of common discipline,
because without such discipline, no progress is made, no leadership effective.
The people of the United States have not failed. In their need, they have registered a
mandate that they want direct vigorous action.
FDR’s First Fireside Chat on the Banking Crisis (1933)
We had a bad banking situation. Some of our bankers had shown themselves either
incompetent or dishonest in their handling of people's funds.
There is an element in the readjustment of our financial system more important than
currency, more important than gold, and that is the confidence of the people. Confidence
and courage are the essentials of success in carrying out our plan.
We have provided the machinery to restore our financial system, and it is up to you to
support and make it work. Together we cannot fail.
Learning From History
The Result of FDR’s First Fireside Chat
• Money started pouring back into the banks and
gold back into the Federal Reserve
• Dollar bounced back spectacularly in relation to
other currencies
• Stock market opened with trading volumes at
record high
• Treasury certificates sold at the highest rates since
World War I, which bankers a few days earlier had
feared would not sell
• The banking crisis came to a quick and positive
end, and the country rebounded with the New
Deal, confidence and leadership.
Sustainable Investment Initiative
Capital Markets Briefing Paper:
Sustainable Investment Business Case©
Summarizes four years of Wall Street due
diligence with investors, investment banks &
rating agencies concluding that green buildings
and certified sustainable products are:
• More profitable
• Less risky
• Preferred by investors in Survey
initiated with S&P covering over
$3.3 trillion in assets.
Briefing Paper will be released for top management at NYSE Press
Conference in 2d Q 2009
Sustainable Investment Initiative
It’s Critical to Restart Securitization
• Securities provide about 60% of
global credit.
• Total debt is about equal to GDP.
• Many owners have financing terms
coming due with no refinancing
options.
• Banks need to start making money.
Green Building Securities Provide the Market With What it Wants:
Low risk, more valuable collateral, investor preference / confidence,
liquidity, social benefits, higher net operating income
Sustainable Investment Initiative
Green Building Financing Program
San Diego Pilot
- $1B mixed use complex
- LEED Platinum +
- CMP Green Value Score: 77
- Section on Bond Offering
Official Statement
documenting higher value.
Seattle Pilot
San Francisco Pilot
- Existing building refinance to
minimum Green Value Score
- City, BOMA & CBRE Partners
- Cheaper cost of capital pursued
- LEED Gold $300M complex
- Public / Private / Mixed Use
- Section on Bond Offering
Official Statement
documenting higher value.
Sustainable Investment Initiative
Green Building Financing Program
Green Building Security
- $500M Pool through large bank
- Green buildings qualified by
Underwriting Standard CMP
Green Value Scores
- Section on Bond Offering
Official Statement
documenting higher value.
California AB 811 Model
Resolution
- $200B market
- Minimum Green Value Score
- Leveraging local government
financing with investment bank
and investor funds
- Cheaper cost of capital pursued
Capital Markets Partnership
CMP Officers, Chairman, Hon. Gavin Newsom, San Francisco Mayor, USCM
Sustainable Protocol
& Underwriting Standards
Financial institution leaders are JPMorgan
Chase, Citi & Bank of America
• Due Diligence Framework
• Green Building Industry
Sustainable
Investment
Protocol
Operating
Group
Value Rating System©
• $3.2T Institutional Investor Survey
• Business Case (Peer Review)
• Standards Development
• Executive Briefings (Peer Review)
• Consensus Standards Approval
• Green Building Financing
Sustainable
Investment & Finance
Committee
GHG / Carbon Credit
Monetization
Sub-Committee
Green Building
Underwriting Standards
Committee
Education
Sub-Committee
• Product Development
• Market Adoption
Standards
Equivalency
Sub-Committee
Standards
Adoption
Sub-Committee
Capital Markets Partnership
CMP Officers
Green Building Underwriting Standards Committee
Officers
Wade Crowfoot, Director, Climate Change Initiatives, San Francisco Mayor Gavin Newsom
Steve Hoffmann, President, Hoffmann & Associates
Rich Pietrafesa, Managing Director, Destiny USA
Tomek Rondio, President, Mortgage Green
Michael Schneider, Vice President, Marxa Kubo
Mario Silvestri, Vice President, Wells Fargo
Ken Willis, Vice President & Director, Federal Home Loan Bank of Boston
Dan Winters, Managing Principal, Evolution Partners
EMERGENCY Consensus Standards Launched in April 2008 by JPMorgan
Chase, Wells Fargo Wachovia.
Unanimously Approved September 2, 2008.
Scoring their Buildings Pursuant to the Standard are JPMorgan Chase, Jones
Lang LaSalle, CB Richard Ellis, Freddie Mac, Federal Home Loan Bank.
What is “Green” in the Real Estate Industry?
1. Best business practices
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–
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Maximize efficiency aspects in construction /
operations
Minimize waste and costs
Capture ‘free’ inputs from natural environment
Increased architect / engineer / contractor
coordination
2. Mark of high-quality construction and asset
value via several third-party verification
processes
3. A product differentiation marker based on:
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Energy and water cost savings
IEQ and associated health benefits
Amenities
Asset quality (perceived / real)
Why Are Investors / Companies Going “Green”?
It’s just business……
1. Operational cost efficiency
2. Risk reduction
3. Best management practices
4. Employee productivity
5. ‘Halo effect’
Successful Precedent
Phase 1 & Property Condition Assessment (PCA)
Resulted in 95% US Market Penetration in 3-5 Yrs.
100%
Phase 1 and PCA were
mandated
by Rating Agencies
for all mortgage backed
securities
90%
PCA
Growth
80%
Phase 1
Growth
70%
60%
$500M
Green Building Security (GBS)
50%
40%
3rd Q 2009. Using CMP
Underwriting Standards, Due
Diligence & Investor Survey
30%
20%
LEED Green Building Growth
10%
Phase I
Property Condition
LEED
Green Power
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
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98
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95
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94
19
93
19
92
19
91
19
90
19
89
19
88
19
87
19
86
0%
Economic Benefits
Projected* 70% US Commercial Green
Building Market Penetration*
Energy Savings & Daylighting:
Construction Waste Reduction:
Water Pollution Savings from Water Conservation:
Energy Savings from appliances & Lighting:
Added Value from Increased Occupant Productivity
(5%), IAQ & Reduced Absenteeism:
Health Care Savings
Emission Reductions’ Market Value:
$
Total
$36 Billion/yr
$6.7 B/yr
$20 B/yr
$24 B/yr
$632 B/yr
$75 B/yr
1.1 B/yr
$795 Billion/yr. value added
* 1. Leonardo Academy / MTS Projections 2003, Surgeon General 2006 (certified bdgs).
2. Green retail buildings will also accrue increased retail sales.
3. Excludes overwhelming benefits from avoided climate damages, & originator profits.
4. Dollar benefits are $200B/yr. for UK, $200B/yr. for rest of Western Europe, $87B/yr.
for Canada & $80B/yr. for Australia. MBS is $4 trillion global industry (SEC 2003).
Before it’s too late
UK – Stern Review – Nov ‘06
PROJECTED GLOBAL WARMING ECONOMIC IMPACT - Up to 20% of Global GDP
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Report analyzes economic global impacts of climate change
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“Business as Usual” vs. global innovation and market-based intervention
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QUOTE: “Climate change…greatest and widest ranging market failure ever seen…”
Relates costs/risks on economic, environmental, and social scales
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Floods / Storms
– Mass Human and Species Migration
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Agriculture Yields
– Species Extinction
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Fresh Water Access
– Heat Waves / Cooling / Droughts
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Disease
Bush White House 2008 Climate Report Concurs with these Impacts
US Conference of Mayors Support Resolution
June 2008
Underwriting Standards & GBS Global Carbon Reduction in
5-10 yrs Enhances Energy Security & Stops Imminent
Irreversible Dangerous Climate Change
Fossil fuel use in 2000 (IEA) Allocation of 6.2 GtC/yr. (Princeton)
Allocation
ofof
6.2world’s
GtC/yrclimate
Buildings generate
most
pollution from electricity and heating. On average,
certified buildings have 50% less conventional
energy & climate pollution.
Electricity: 40%
Fuels used directly: 60%
Electricity
Transportation
Heating
LEED EB CERTIFIED
National Geographic Society
Headquarters, Wash., DC
The Society added $16M in
value from this LEED
certification from a higher
appraised value, raising
tenant rents, lower
operating costs, increased
credit rating from Moody’s,
& lower interest rates on
large loans secured to the
building. Presentation at 2003
Congressional Green Building Luncheon
by Chris Liedel, CFO, National
Geographic Society.
SMaRT Sustainable Product Standard
Adopted by Leading Fortune 500 Co’s, Fireman’s Fund, US Green Building Council’s LEED, &
Underwriting Standards. Covers 80% of the world’s products across the global supply chain.
Multiple environmental, social & economic benefits over global
supply chain. Economic benefits exceed green buildings.
Maximum Credit for Certified Products With:
• 100% reduction of 1000 pollutants
• 100% Green-e power use & conventional energy reduction
• 100% postconsumer recycled content
• 100% biobased organic content w/BMPs
• 100% reuse/reclamation
• Social equity requirements
FSC Certified Wood is one of 15 Prerequisites
300 manufacturer reps are educating their customers
CFO Research Services / Jones Lang LaSalle Report
March 2008
Top Sustainability Priorities
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Improve energy efficiency
Reduce carbon footprint
Reduce environmental impact of operations
Manage risk
Barriers – CFO / Executive Reponders
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Lack of decision framework / tool
Inability to measure effect on shareholder
value / investor returns
Not integrated into financial management
and control systems
Respondent Quote
“As more efficient measuring tools are
created and utilized, finance’s role in
sustainability efforts will be greatly
enhanced.”
Survey Metrics:
175 responses – senior finance executives
95% from companies w/ over $500MM revenue
Green Building Underwriting Standards
Principles
1. Easy entry / differentiate superior performance
2. Easy to analyze / simple to implement
3. Disciplined
• Tangible financial impacts
• Acknowledgement of intangible value
4. Utilize consensus standards / reduces risk
5. Third-party verified
6. Standard Unanimous Approval
• Broad industry invitations and participation
• Significant comments and amendments
• ANSI consensus process
What is it? How does it work?
Structure – Green Building Underwriting Standards
• Recognizes and incorporates existing industry standards
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Comprehensive
Transparent
Market-driven
Consensus-based
• Standards include
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EPA EnergyStar
USGBC LEED Rating System
MTS Climate Neutral
• Performance based
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Energy
Water
Indoor environmental quality
• Third-party verification requirement
– Self-Regulation = No Regulation = Wild West
Example
Capital Markets Partnership Commercial GreenValue Score Application
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LEED Gold certified office building
EnergyStar score = 80
Green Building Underwriting Standard score = 74
Climate Neutral certified
ENERGYSTAR Score
Climate Neutral Certified
LEED RATING
C
M
P
GREEN
SCORE = 78
Green Building Underwriting Standard Score
CMP GREEN SCORE
Score
80
Value
Ratio
40%
Adjusted
Score
32
YES
NO
10%
0%
10
NONE
CERTIFIED
SILVER
GOLD
PLATINUM
0%
2%
5%
10%
15%
74
35%
100%
10
26
78
Crude Oil – Actual (Jan 1997 thru September 24, 2008)
World oil production flat since 2004 / China and India’s consumption surging /
domestic consumption in oil producing countries increasing
$140.00
Energy traders / OPEC publicly refer to the ‘proper’ price of $85 / barrel at
which point OPEC reduces production to support prices
$130.00
$120.00
$110.00
$100.00
$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
NYMEX Light Sweet Crude
Sep-08
May-08
Jan-08
Sep-07
May-07
Jan-07
Sep-06
May-06
Jan-06
Sep-05
May-05
Jan-05
Sep-04
May-04
Jan-04
Sep-03
May-03
Jan-03
Sep-02
May-02
Jan-02
Sep-01
May-01
Jan-01
Sep-00
May-00
Jan-00
Sep-99
May-99
Jan-99
Sep-98
May-98
Jan-98
Sep-97
May-97
Jan-97
$0.00
US Electricity Prices (1982 – 2006)
₵ / kwh
12.0
10.0
8.0
6.0
4.0
2.0
Average Retail Price of Electricity, Residential
Average Retail Price of Electricity, Commercial
Average Retail Price of Electricity, Industrial
Average Retail Price of Electricity, Total
Source: US Department of Energy
http://www.eia.doe.gov/fuelelectric.html
06
20
05
20
04
20
03
20
02
01
20
00
20
99
20
19
98
19
97
19
96
19
95
19
94
19
93
92
19
91
19
19
90
19
89
19
88
19
87
19
86
19
85
84
19
83
19
19
19
82
0.0
US Electric Power Generation Sources (2007)
Solar / Wind
2.3%
Hydro
6.5% 0.2%
Nuclear
19.9%
Coal
49.8%
3.0%
Petroleum
17.9%
Natural Gas
Coal
Other Gasses
Natural Gas
0.4%
Petroleum
Nuclear
Solar / Wind
Hydroelectric
Other
DOE Coal Prices
June 2003 to July 2006
Central
Appalachia
+88%
Northern
Appalachia
+41%
Illinois
Basin
38%
Uinta Basin
114%
Powder
River Basin
100%
Source: http://www.eia.doe.gov/cneaf/coal/page/coalnews/coalmar.html
DOE Coal Prices
June 2003 to July 2008
July Price = $149 / ton
July Price = $140 / ton
+312% - Central Appalachia
+452% - Northern Appalachia
+200% - Illinois Basin
+254% - Uinta Basin
+127% - Powder River Basin
Source: http://www.eia.doe.gov/cneaf/coal/page/coalnews/coalmar.html
Wellhead
City Gate
http://www.eia.doe.gov/oil_gas/natural_gas/info_glance/natural_gas.html
Residential
Commercial
Sep-2007
Jan-2007
May-2006
Sep-2005
Jan-2005
May-2004
Sep-2003
Jan-2003
May-2002
Sep-2001
Jan-2001
May-2000
Sep-1999
Jan-1999
May-1998
Sep-1997
Jan-1997
May-1996
Sep-1995
Jan-1995
May-1994
Sep-1993
Jan-1993
May-1992
Sep-1991
Jan-1991
May-1990
Sep-1989
Jan-1989
May-1988
Sep-1987
Jan-1987
May-1986
Sep-1985
Jan-1985
May-1984
Date
Natural Gas Spot Prices (Oct ’83 – Apr ‘08)
$18.00
$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
Conventional Energy Costs Expected to
Continue Increasing at 20% / yr. for 10 yrs.
20.00
10x
18.00
Only Scenario Based on Actual
Data Concerning Global
Depletion of Oil and Natural Gas
Resources
16.00
14.00
12.00
10.00
5x
8.00
4x
6.00
3x
4.00
2x
2.00
'05 Increase
of 40%
BOMA '04 Avg
$1.83 / SF
2004
2005
2006
Avg. Inflation @ 3% (Myopic)
2007
5% / Year
2008
2009
8% / Year
2010
10% / Year
2011
2012
15% / Year
2013
2014
2015
Simmons Scenario (22%/year)
Energy Market Drivers
Resource
Scarcity
Energy
Reliability and
Security
Emissions and
Climate Change
Globalization
Digital Economy
Aging
Power Grid
Market
Restructuring
1990
1995
2000
2005-10
2010-20
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Washington, DC 20007
202-338-3131
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