The Evolution of Investing

For as long as people have been investing in companies, companies have been aware that keeping their shareholders happy is a big part of their job.  Over the past two decades, the ways investors influence companies and companies respond to the desires of their shareholders has evolved.

Beginning in the 1990s, the idea of socially responsible investing (SRI) became more popular among investors interested in promoting social change while also generating a financial return on their money.  In its early form, SRI involved supporting companies seen as delivering a positive impact on society, as opposed to companies whose work product or practices were seen as negative.

Throughout most of the 1990s, investors motivated solely by profits might have looked the other way when a company they fractionally owned fumbled the ball on a significant environmental or safety issue.  In recent years, however, more and more investors are unwilling to ignore the end results of their financial support.

Today’s investors think about the balance between profits and policies, between share prices and sharing our climate.  

As we will see, even if profits remain the primary concern, there are other measurable factors that combine to define value for investors.  And increasingly, companies are focusing on expanding the value proposition for their investors to include issues other than just bottom-line profits.

Understanding ESG

As the 20th century came to a close, the idea of Corporate Social Responsibility (CSR) gained traction, especially in the world’s most developed countries.  CSR was based on the belief that corporations should self-regulate to promote ethical practices, and that philanthropic and even activist causes were expected from large corporations.

While CSR became a common part of the conversation, for many investors the line between corporate intentions and verifiable data was too blurred.  CSR was viewed by some as a way for corporations to distract attention from a poor environmental track record or from shameful overseas labor practices, simply by having employees volunteer at a local homeless shelter, or by sponsoring a community “fun run”.

Over the last 20 years, as the social value of conscientious investment has become more important to shareholders, a new way of quantifying and measuring corporate responsibility has emerged.  Beginning around 2005, advocates began suggesting that measurable Environmental, Sustainability, and Governance (ESG) commitments are the essential action steps required to back up lofty corporate intentions.

Importantly for proponents of ESG investing, CSR is still a necessary part of the mix and it is expected that large corporations should stand for something greater than simply generating profits for shareholders.  

Moving forward, however, ESG advocates assert that programs are required to set concrete goals and provide detailed report cards on the specific steps large companies are taking to improve their operations and management practices.

Creating Objective Results from Subjective Goals

Of course, you can pick any two or three people and put them in a room together, and it won’t be long before someone’s idea of “good” falls short of or goes beyond someone else’s thoughts on the matter.  It is the same with corporate ESG goals.  

Remember this: corporate ESG goals are subjective, they always reflect a particular bias, and they do not align perfectly with all viewpoints.  But ESG goals are important for today’s investors, and that makes them a matter of business survival for publicly-traded companies as well as large private companies.

Therefore, a growing number of companies operating in 2022 are actively engaged in establishing and working to meet ESG goals.  According to a poll conducted for NAVEX Global, a leading risk and compliance management company, trends in ESG reporting in the U.S. and Europe are clear.

The NAVEX Global poll revealed that as of late 2020, 88% of publicly traded companies, 79% of venture and private equity-backed companies, and 67% of privately-owned companies had ESG initiatives in place.  Those numbers are expected to rise in our era of socially conscious investment.

Today’s investors are not afraid to pull their money away from companies that are not actively working to reduce energy usage, lower the environmental impact of their operations, and conduct their business ethically and transparently.  Modern investors understand that their money represents an endorsement of a company’s social license to operate.

Therefore, with some combination of values-driven conviction and an awareness that stakeholders at all levels are watching, more companies every year publish ESG goals to guide their operations and to notify their investors that the company is worthy of their continued support.

Often, establishing and meeting ESG goals can be challenging for even the most forward-thinking, socially conscious company.  The good news is, some ESG goals are easier to meet than others.

Identifying the Easy Wins with ESG

For most companies, the fastest way to verifiable ESG success begins by focusing on the “E”, the environmental impact of their operations.  Sustainability and corporate governance are longer-term projects, but environmental initiatives can deliver ESG success almost immediately.

From a practical point of view, a recent McKinsey report on the subject makes the case that focusing on the “E” in ESG can be very good for businesses.  Cost reductions resulting from active energy efficiency measures were listed as primary drivers of overall success.

When looking for quick “wins”, a focus on energy efficiency was found to be of immediate benefit for companies.  Researchers found a significant correlation between resource efficiency and financial performance.

READ: HOW TO REDUCE COMMERCIAL ENERGY USAGE

This is not new information.  Back in 2012, the global climate consultancy Carbon Trust released its Better Business Guide to Energy Savings and asserted that a 20% cut in energy costs can deliver the same bottom-line benefit for businesses as a 5% sales increase.

So with top business consultants in agreement and common sense on board as well, it is clear that the fastest and easiest ESG win is to be found in energy management and energy cost reduction.

For commercial businesses operating today, the most efficient way to capture those efficiencies is to install a Building Automation System (BAS) at the facilities they own and operate.

BAS and the Beauty of Low-Hanging Fruit

According to the US Department of Energy (DOE), commercial buildings account for 76% of total US annual electricity consumption.  Within those commercial buildings, HVAC, lighting, and refrigeration account for 64% of the total electrical draw.

In 2017, the DOE commissioned a study conducted by Pacific Northwest National Laboratory (PNNL) that looked at 14 different building types and 34 different building control measures.  

The researchers created models and ran simulations across 16 US climate zones, estimating how different building controls could reduce energy consumption and peak demand for specific building types in particular regions of the country.

In the end, the PNNL study concluded that commercial buildings with current, properly tuned controls could expect to see energy consumption cut by approximately 29%.  This figure was given as an average savings amount when looking at all commercial buildings.

Interestingly, while 29% energy savings is certainly impressive, the study identified some building types with the potential to save even more.  The PNNL study noted that secondary schools with proper controls could expect to save roughly 49% on energy costs, while standalone retail stores and auto dealerships should anticipate savings of approximately 41% once they incorporate modern control systems into their operations.

With this information, simple math illustrates the value of building automation in reducing energy consumption.  For companies looking to rack up a quick ESG win for their shareholders, building automation systems are the answer.

BAS Offers More Than Just Energy Savings

Simply stated, building automation involves centralized management of a facility’s HVAC, electrical, lighting, security, and other related systems through one distributed control system.  Building automation systems rely on computer networking of electronic devices within the facility to monitor and control their operation.

The best BAS installations keep building climate within a tightly specified temperature range, provide light to spaces based on occupancy schedules or motion detection, monitor device performance, and notify maintenance staff of any malfunctions or inefficiencies within the system.

While the primary benefit of building automation involves energy usage and cost reduction, a BAS provides convenience for facility managers as well, allowing them to monitor operations at all their facilities from one screen.

According to Zack Cornwell, Enterprise Sales Manager at FSG Smart Buildings, considerations beyond energy cost savings can make a huge difference to facility managers. 

With BAS, you should consider what matters most to your team. Is it reducing service calls on the weekends? Or is it having greater transparency and control of your facilities?

Zack Cornwell, Enterprise Sales Manager at FSG Smart Buildings

Most of all, Cornwell says, “BAS is now considered an essential utility just like water, electrical service, gas, and sewer.  BAS used to be something nice to have, but today these systems are a mission-critical aspect of facility management.”  

Especially for multi-facility organizations, building automation delivers operational efficiency and reduced maintenance costs that, when combined with energy savings, can be transformative for businesses.

FSG Smart Buildings Delivers Documented ESG Success

For multi-site retail property owners, FSG Smart Buildings offers BAS solutions that deliver proactive results month after month, and year after year.  Our data management and 24/7 Call Center response team support businesses with documented results and a verifiable ROI.

FSG Smart Buildings BAS solutions deliver best practices and reduced energy consumption for retail properties, and our nationwide team supports your efforts to scale these solutions across large organizations.

By leveraging real-time data and trends, our team can proactively impact building maintenance budgets and practices, and ensure OPEX savings on top of dramatic energy use reductions.

For businesses focused on delivering environmental and sustainability success to their shareholders, BAS solutions from FSG Smart Buildings represent the best first step any company can take.  The energy reductions are dramatic and measurable, and the ongoing OPEX savings to be gained through maintenance function efficiencies are critical for businesses.

LEARN MORE ABOUT FSG SMART BUILDINGS

If you want the freedom to focus on your business, secure in the knowledge that your environmental goals are being met around the clock, contact FSG Smart Buildings today.  When you work with us, all monitoring, response, and data analysis are taken care of, freeing you to get back to the work you do best.

ESG goals – or something else like them – are likely here to stay.  Smart companies that focus on smart energy management are guaranteed at least one solid win every year. 

Let FSG Smart Buildings show you how building automation can transform energy usage and maintenance spend across your entire organization.  Contact us and find out how we can deliver success for your organization today.

If you are interested in learning more about building automation and data analysis that delivers measurable results for customers, come work for us!  FSG Smart Buildings is hiring talented people who are looking for a great career in building automation.