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  6 Institutional real estate is in the midst o a major downturn

growing awareness among investorsthat environmental and social analysis canenhance their ability to assess building andportolio perormance over the long term.

Energyuseingreenbuildingis29to50 percent less than non-green counterparts. •Greenbuildingsuseanestimated40 percent less water. •Carbondioxideemissionsingreen buildings are reduced by 33 to 39percent. •Solidwasteattributabletogreenbuildings is reduced by 70 percent

In practice, these issues havebeen treated as vital by many investors – RPIoers a means to bring them together into acoherent ramework

SmartGrowth

SocialEquityandCommunity Development

UrbanRevitalization

size o the US commercial real estate marketat $5 trillion, with approximately $2.5 trillionin assets owned by institutional investors.

EnergyConservation

EnvironmentalProtection

WorkerWell-Being

HealthandSafety

LocalCitizenship

CorporateCitizenship

Figure 2: “Market standard” fund performance characteristics

The increased global and 2.2  Impacts o Sustainability on Institutional Real Estate Table 1: Sustainability Impacts on Real Estate social awareness about sustainability ingeneral has sharply impacted institutional realestate in several interrelated ways,

Global Reporting Initiativeand Principles or Responsible Investing

Ideally, a unied approach could also be takento visualizing, analyzing, and managing thedata obtained or individual metrics, buildingupon the action items mentioned aboveto create a dashboard or monitoring andimproving portolio perormance in the contexto RPI and investor and stakeholder interests.

The eld o RPI lacks a powerul, standardizedset o portolio-level metrics which isrecognized and used by investors andmanagers across the real estate industry,thereby dening and giving credibility to thepractice o RPI

CBRE Standardso Sustainability

we have developed a seto 26 quantitative metrics that can helpinvestors to nd, create and articulate valuethrough improving the economic, social, andenvironmental prole o their investments.

Thesemetrics were selected or their ability to allowreal estate proessionals to better addressrisks and identiy opportunities or long-termvalue creation.

Table 2: Proposed RPI Metrics

Measuring the walkscore or a property isa simple as putting in the address into thewalkscore calculator (www.walkscore.com)

the premiums suggesthigher rents, occupancy and general marketdemand or walkable properties.

By trackingthe ability o properties to create jobs andprovide services or underserved areas,investors can lower risks associated withregulation and community opposition as wellas setting an example o social sustainability

Buildings – even green buildings – oten lacka close connection to their surrounding areaand community. Developing CommunityEngagement plans on a site-by-site basisallows projects to be sensitive to the needso the citizens and areas in which they areconstructed

ensures that negative impacts and publicopposition to projects will be minimized.

These plans should also include provisionsor the public use o private space, which haswell-documented success in San Franciscoand other cities. Across a portolio, investingin projects that positively contribute to thecommunity in which they are anchoredcreates a positive image, minimizes, risk, andimproves social sustainability

Table 3: Portfolio Characterization

Several categories contain RPI metricswhich investment managers could directlytie to value either through their indication o decreased operating expenses or indirectlyaid in obtaining higher rents, lower vacancy orselling the property at a higher price. Othercategories do not link directly to asset value,rather allow the investor to property determinethe correct ESG measures which must bein place in order to achieve maximum RPIbenets

Prudent portolio managers will look toenter into portolio wide contracts orcommissioning, eciency, renewables, andother measures to improve perormance,and use RPI metrics to track the value o improvements portolio wide

Environmental metrics are perceived as havingmore direct links to value, however socialmetrics are seen as helpul in characterizingprogress on advancing the social agenda o the und, while maintaining nancial returns

Environmental metrics are more malleablethan social metrics—in other words, mostenvironmental metrics can be improved overtime across the portolio, whereas socialmetrics are oten determined at the point o acquisition, and remain static (walkability, CBDproperties, etc.)

To ensure ease o collection and interpretationo the additional data, systems should be putinto place to ensure the metrics are trackedat each property and easily aggregated to theportolio level.

Portolio managers, property managers,and stakeholders will be able to engage ina dialogue regarding value created acrossthe triple bottom line through responsibleinvestment practices

The scope o RPI is broad. It includes, orexample, “deep green” projects that ocuson poor communities or environmentallyragile areas, energy ecient buildings thatoer clear nancial advantages throughreduced operating costs, aordable housingprojects that draw upon local tax credits,and now carbon reduction projects thathedge risk and result in renewable energycerticates.

There are many useul sotware tools on themarket- rom EnergyStar Portolio Manager(mentioned previously) to proprietary systemssuch as Tririga (www.tririga.com). Tririgacombines portolio management tools withportal views or property managers, andacilities management unctionality. Thishelps to integrate goals and establishcommon metrics rom asset to asset

In a changing and volatileinvestment environment, there is a uniqueand urgent need to better understandthe benets o making a commitment toresponsible property investing. The potentialor improvements at the portolio level isgreat, with benets accruing to investors,the industry, and society as a whole, and thepotential or these considerations to improvethe industry as a whole is even greater.

•Long-termvaluecreationthrough increases in assessed value o property •Greatlyreducedoperatingcostsbydriving environmental metrics •Minimizationofriskinseveralkeyareas during acquisition •Improvedpublicimageandinvestor condence •Improvedrelationshipbetweeninvestors and asset managers •Increasedvisibilityandtransparency•Demonstrationofvaluesinpractice

  26  The benets o committing to RPI arepotentially signicant, but a lack o uniormmetrics which can be adopted industry-wide has hindered the potential impact o RPI on the real estate sector.

Private equity funds

Prominent family offices are actively seeking investment partnerships that can help them source, vet, and execute impact investment deals in sectors ranging from sustainable agriculture to healthcare to urban infrastructure.Private foundations are seeking to partner with investment banks and development finance institutions to make impact investments in areas related to their social missions.

Despite this momentum, the weakness of market mechanisms (such as rating agencies, market clearinghouses, syndication facilities, investment consultants) creates debilitating inefficiency that hampers investment. The nascent industry remains beset by inefficiencies and distortions that currently limit its impact and threaten its future trajectory: Investors are largely unable to work together effectively given a general confusion of terminology. This limits investors' ability to share knowledge and co-invest, which perpetuates inefficiency and fragmentation in the field. The absence of basic market infrastructure, like standards for measuring and benchmarking performance, constrains impact and capital flows.

Clients of leading private banks and pension funds are calling on their investment managers to offer impact investment options.

The combination of these factors - barriers to information flows and collaboration, a lack of infrastructure, and an underdeveloped ecosystem of intermediaries and services providers - threatens the evolution of the impact investing industry and, ultimately, its ability to realize its potential for social and environmental impact

Seems like NAREIT and FTSE are launching these indices in response to investor demand for a new benchmark and new investment vehicles that reflect interest in sustainable real estate projects.

Because of the growing demand for investors seeking to understand how their portfolios will be affected and how they can reduce their risk, the new green property indexes should be well received for institutional investors.

have recently been hearing more from our clients about which companies own LEED certified or Energy Star certified assets

This bold new initiative is a milestone product that should lead to significant opportunities for this participating in the growing market.

Academics have been finding that green-certified properties outperform otherwise similar non-certified properties with higher rents and higher occupancy rates, but until now there’s been no way for any investor to take advantage of that outperformance except to buy the buildings themselves or to do immense research into which REITs own green portfolios.  We’ve essentially done the background work that makes it possible for investors to participate in the greening of the real estate market.

“The Fund allows banks the opportunity to invest in a vehicle that targets community development capital to their local markets,” said Barbara VanScoy, senior portfolio manager at Community Capital Management. “Many of these markets may be areas that banks have difficulty in reaching. We also work closely with bank examiners and our bank shareholders to ensure that the Fund’s investments are compliant with the regulations and respond to changing community development needs.”

At that time we started up FreelanceSwitch where we could put our lessons learned. We also started a tutorial blog. Those sites today receive close to 10 million visits a month. They have grown a lot over the years. The company today comprises two parts. We have the market places and 12 tutorial sites that cover everything from game development to making music sound like a DJ.

“30 under 30” in energy by Forbes.

Their company started slowly, garnering interest-free investments from individuals to fund solar installations on five community projects. They range from homes on a Navajo reservation in Arizona to the Asian Resource Center in Oakland. All are smallish installations

I invested $100 in the Asian Resource Center installation in 2011, in equal parts to support the fledgling company as well as a social-service organization in my hometown

Those first projects were funded using a zero-interest investment model similar to Kiva, where investors get their principal back over time but no interest. This allowed Mosaic to avoid federal regulation and to go to market, learn the business, get feedback, and show traction for the idea. At the same time, it launched into the process of registering with the Securities and Exchange Commission, the federal agency that governs investment firms.

More recently, the company started raising money for projects in which it would pay interest. It can do this while waiting for SEC approval thanks to something called Regulation D, which exempts from regulatory oversight the offer and sale of up to $1 million of securities in a 12-month period.

A small group of investors was invited to put in as little as $25 and have been promised a return of 6.38 percent over five years.

The project is projected to save the youth center more than $160,000 through reduced electricity costs.

I invested $200 in this project as part of Mosaic’s private “beta” investment round

“As an asset class, the default rates on solar leases and power purchase agreements are extremely low,”

If I want, I can reinvest the earned interest and repaid principal in other Mosaic projects with the click of a button.

nlike investing in CDs, there are risks in Mosaic’s projects. The solar-installation customer could default on its monthly payments. The solar anels or installation could be faulty, tying the project up with repairs, negotiations, or worse.

There are a lot of unknowns: the number of people willing to invest sums, small or large, in energy projects offered by a start-up with a very short track record; the cost of attracting and servicing these investors; the number of available investment-quality energy projects; the actual performance of those projects during the life of the investments;

Together with a $2 million grant from the Department of Energy

All told, 51 investors ponied up $40,000 for the 106-panel installation; the whole project got funded in just six days. I’ve already received my first interest payment.

It’s a bold idea: Raise money from the masses in order to bring solar to the masses, providing value to everyone along the way.

Having proved the concept, Parish and Rosen are now ready to kick things into high gear, throwing open the doors to all qualified investors.

“The economics of solar have begun to make sense in more places, and online investing and peer-to-peer finance are becoming widespread. Those are the two big forces that we’re a part of.”

I asked him why no one had done this before. “It’s a really difficult set of skills and competencies that you need to pull together on one team to make this business model work,” he explained. “You need the securities law expertise. You need the solar project finance expertise. You need the technology expertise to build the online investment platform, and you need the marketing expertise to get people to invest in the projects.”

For each project, Mosaic provides the underwriting and due diligence. “If we like it and it meets our investment committee’s criteria, we make a loan offer to the project developer or the project owner, and negotiate a loan to them.” Mosaic takes a servicing fee (the difference between the interest rate charged the developer and the rate pays investors) and an origination fee of between 3 and 5 percent of the loan, which the developer pays. Mosaic doesn’t do the installation itself — it contracts that out.

Clearly, not yet a pathway to riches. What’s needed is volume.

“Our goal is to be doing billions of dollars of investments a year in clean-energy projects,

“We have already had a lot of developers coming to us," he says. "We’re interested in offering high-quality, clean-energy projects for people to invest in.

We believe clean energy is good in and of itself and is a great asset class for investment. So we’re looking at all kinds of projects.”

It’s not just solar. Parish and Rosen are looking at a broader category of projects to finance — what they call clean-energy infrastructure. That includes other forms energy as well as energy-efficiency projects and electric-vehicle infrastructure.

, the company aims to scale its offerings, including geographically, to get millions of Americans involved with funding clean-energy projects.

However it plays out, it’s a compelling and potentially disruptive business model. Allowing smaller investors to participate in clean-energy investments is an exciting possibility. And the relatively predictable returns of solar

can make these investments a safer bet than many traditional Wall Street investment vehicles.

And not for just small guys. Imagine if larger mission-driven investors, including pension funds and university endowments, started pouring money into Mosaic. The expanding investment pools could rapidly accelerate the growth of renewable energy and efficiency projects in the marketplace.

“I think a lot of people are just excited about the model,” says Parish, “and have been wanting to find a place that they can feel good about investing, that they can also generate pretty good yield from. And that’s what we’re trying to do.”

Parish makes a point: Some of this is an exercise in feel-good investing. But that’s nontrivial: How many of your investments do you feel good about? Even some of the so-called socially responsible funds hold stocks of fossil-fuel companies and other corporate nasties in their portfolios. If the nascent trend of disinvestment in fossil-fuel companies takes off among climate-minded investors, where will they next put their money? If Parish and Rosen have their way, there will be a new generation of cleaner investment alternatives to be found — perhaps, like me, right in your own community.

ensuring the cars were in the storytelling

the series is aiming for something more subtle: instilling in viewers an affinity for Buick.

“Buick is enabling the entire experience

Russ Axelrod

Buick models, particularly the Regal, appear only incidentally in the videos, as in product placement deals in television shows or movies. Specifically, participants drive from one establishment or attraction to another in Buicks, but never mention the brand.

“If I’m a consumer coming to the site, the underlying message is that Buick gets me, that they understand what I like on a content basis, and if they understand what I like on a content basis maybe they’ll understand me on a vehicle basis.”

It is no coincidence that the brand is, through the series, encouraging a fresh look at cities at the same time its ads encourage a fresh look at its cars.

“Buick is sort of trying to reinvent itself in the eyes of the consumer,”

Cities are reinvigorating themselves and being discovered in a new way, whether it’s Miami or L.A. or New York, and that’s what Buick is trying to get across as well.”

Buick has been the company’s fastest growing brand

“We talked about Detroit, and we love Detroit, but it’s not in the original batch of cities because we do quite well there as it is,” said Mr. Casmon of Buick. “Los Angeles, Miami, New York — in some of those markets we don’t have as strong a position, and we’re hoping to reintroduce the Buick brand to that audience, especially those who drive imports who are not familiar with Buick right now.”

The first challenge is to get initial momentum, and then the second challenge is to ramp that up. A few months later we rolled out a strategy where we gave away thousands of dollars of free money on the marketplace. That stimulated sales for sellers and helped buyers see how they could use the site. Four weeks later we had reached a thousand dollars of revenue per week.

That was essentially your business idea being validated.

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