Beyond payback: A comparison of financial methods for investments in green building

Abstract

The green building movement is growing rapidly. Economic analysis of financial, other tangible, and intangible costs and benefits can help to sustain the movement over time. This purpose of this paper is to compare and contrast four methods of economic analysis to support green building decisions, and to identify the strengths, weaknesses, data requirements, and research needs associated with each. Five green features from a project in California are used to illustrate the methods and issues. The features are representative of the types of challenges building developers and designers face. The specific data used is illustrative, and the pattern of results across methods and examples is generally applicable. The more advanced financial calculations provide essential information for overcoming financial obstacles such as split incentives or excessively high hurdle rates for green investments.