Intangibles and Corporate Value: How Can Energy Efficiency Differentiate Corporate Performance?

Jon Low, Predictiv
Blaine Collison, U.S. Environmental Protection Agency
Don Anderson, ICF Consulting

Keywords

Abstract

Intangibles - that is, non-financial factors that don't appear on corporate balance sheets - have evolved over the history of the U.S. financial markets to become the primary valuation driver for equities. A shift from traditional metrics such as units produced or net profits has followed from both the evolution of the U.S. economy toward less production-oriented business and the increased importance of the individual investor. Companies have long been aware of how intangibles such as brand recognition and corporate reputation influence their market value, but only recently have systematic approaches to understanding and managing the mix of intangible factors that contribute to stock price emerged.

Corporate energy costs are often treated as fixed. While progress is being made to benchmark and rate the energy performance of buildings and building portfolios, it's difficult, at a corporate level, to benchmark energy costs against those of comparable businesses. Energy efficiency, despite providing significant and real benefits in terms of operations costs and environmental responsibility, is treated as an intangible asset in corporate valuation. There are no common measures that allow stakeholders to rate and value companies in terms of relative energy efficiency.

This paper will detail efforts to clarify the intangible and tangible shareholder value benefits of corporate environmental performance and energy efficiency. Specific, compelling rewards for this type of approach, which often includes making energy efficiency a priority across the entire corporate building portfolio, will be described. These rewards may be a key motivational factor in moving energy efficiency programs further into the corporate marketplace.