New research suggests that energy conservation projects can improve corporate performance and shareholder value as “Socially Responsible Investors” flock to companies with low exposures to negative environmental, social and governance risks.
According to an article published on ASX.com.au, investors are waking up to the importance of sustainable investing. Investors are increasingly realising that companies that take environmental and social considerations seriously and implement positive actions (such as for example, investing in energy conservation projects ), are reducing financial and corporate risks and therefore more likely to represent better long-term investments.
From an investor’s perspective, sustainable investing involves taking environmental, social and governance (ESG) and ethical considerations into account to better assess and manage risk with the aim of generating sustainable, long-term returns.
ESG factors includes:
- Labour standards,
- Greenhouse gas (CO2) emissions,
- Workplace diversity
- Efficient use of resources
- Corporate governance.
Companies with stronger ESG characteristics are typically lower-risk, better long-term investments, according to MSCI – one of the world’s largest index providers.
MSCI evaluated the influence of these factors across top companies and published their findings in a 2017 research paper (“Foundations of ESG investing”) including data that supports the assertion that high ESG rated companies – with a demonstrated commitment to improving these ESG issues – are more profitable, paid higher dividends and enjoy significantly improved corporate performance.
MSCI also found that an improvement in a company’s ESG characteristics led to increasing valuations over time.
Organisations with a strong ESG profile have a much lower exposure to negative risks related to environmental, social and governance issues. They also have a higher exposure to related opportunities, which can lead to material cost advantages, improved efficiencies and new revenue sources.
Creating value through energy conservation projects
For example, organisations that invest in energy conservation projects, otherwise known as energy savings projects that include a variety of energy conservation measures designed to improve energy efficiency, not only strengthens its ESG profile, but also achieves the following outcomes:
- Reduced energy consumption, typically between 30 – 50 percent or more, if energy conservation projects with holistic energy conservation measures are implemented.
- Significant cost savings on utility bills and lower maintenance costs. This is arguably the most appealing aspect of energy conservation projects.
- Cost savings can be spent on revenue-generating activities, or added to cash reserves / improve bottom-line performance, or distributed to shareholders in the form of higher than expected dividends etc. In any case, improved financial performance will result, likely to attract even further investors.
- Reduced greenhouse gas (GHG) emissions (CO2) – providing a significant public relations boost and competitive advantage. Helps develop genuine competitive advantage in terms of sustainability and corporate social responsibility
- Improvements in health and safety and labour standards through more comfortable working environments (lighting levels, air quality etc).
- Potential new sources of revenue from demand response management and on-selling excess power from renewable sources, either back to the grid, or directly to consumers through Power Purchase Agreements.
- More efficient use of resources (assuming a single-point-of-contact energy efficiency ESCO has been engaged to design, install and maintain a holistic range of energy conservation solutions in a fixed-price guaranteed energy savings project)
- Improved corporate governance through sharing accountability and eliminating risk when engaging a trusted energy services company for performance-based energy conservation projects.
The overall impact of energy conservation projects on corporate performance cannot be overstated. (See also 7 reasons why energy conservation is a smart business strategy)
Energy Conservation Projects – best practice procurement and funding models
- Energy Performance Contracting (EPC)
- Guaranteed Energy Savings Project (GESP)™
- Energy Services Agreement (ESA), such as the 3E Group Services Agreement™
Who can help my company to implement energy conservation projects?
Energy Services Companies (ESCOs) are specialist providers of energy conservation solutions.
Engaging a single-point-of-contact provider of energy conservation projects is a good place to start as they help to streamline all aspects of project design, management and delivery.
Look for ESCOs that offer the following:
- End-to-end solutions capability including energy advisory, energy efficiency and energy management services
- Demonstrable experience and success working with companies in your industry or sector
- Detailed site assessments from qualified engineers
- Holistic range of innovative engineering-based solutions
- Product-independent advice and recommendations relevant to product and technical specifications of identified energy conservation measures.
- Fixed price implementation of turn-key energy conservation projects
- Guaranteed savings
- Product and labour warranty
- Measurement and verification to international standards (IPMVP)
- Actual savings reports
- Energy management reporting
- Accountability for results
The main benefit of partnering with an ESCO of the above description is that it transfers corporate risk to the ESCO and gives you certainty of agreed performance outcomes from the energy conservation projects. Therefore, this reduced corporate risk leads to higher ESG ratings which ultimately results in improved investor relations and corporate performance.
The Sustainability Advantage is your Competitive Advantage:
- Shareholders benefit through increased profitability, dividends etc.
- When investors see a demonstrable commitment to sustainability (i.e. through large-scale energy conservation projects) it increases their proclivity to invest in your company.
- Senior Executives are able to communicate (and take credit for) genuine sustainability initiatives in annual reports (e.g. details of the various energy conservation projects or initiatives).
- Supports talent retention and recruitment efforts, ‘winning hearts and minds’ of employees through environmentally responsible, ethical and sustainable practices.
- Solidifies brand loyalty and helps to attract new customers concerned with Environmental, Social and Governance issues.
Click here to learn more about the benefits of such energy conservation projects.
3E Group specialises in designing and implementing fixed-price guaranteed energy conservation projects. 3E Group is a single point of contact provider of end-to-end energy conservation solutions including: Assessment, Design, Procurement, Installation, Commission, Monitoring (Analytics), Management and Maintenance; performance-based contracts including Guaranteed Energy Savings Projects and zero-debt cash-flow positive 3E Group Service Agreements.
Talk to an 3E Group Solutions Manager today about how we can partner with you to achieve your sustainability and corporate performance targets!
Other content you may be interested in reading:
- Latest News and insights
- Advantages of Energy Efficiency Upgrades in Commercial Buildings
- Who are the leading EPC ESCOs in Australia?
- Seven ways to fund an energy savings project