There is growing talk these days about Sustainability. This is not a passing fad. People from all walks of life and political persuasions are recognizing that good business requires healthy, functional communities and vibrant ecosystems. For companies and investors who are interested in sustainability, a term that is making its way into business lexicon is “TripleBottomLine”. This expression was coined by John Elkington, co-founder of the business consultancy SustainAbility, in his 1998 book, “Cannibals with Forks: The Triple Bottom Line of 21st Century Business”. As this term, “TripleBottomLine” suggests there are three measure of success: economic prosperity, social fairness, and environmental health.

Colorado businesses are at the forefront of Sustainability.  I attended a gathering in Boulder in which Gary Hirshberg, CEO of Stonyfield Farm Yogurt spoke about how the TripleBottomLine is imbedded into everything they do at Stonyfield Farm. During a question and answer session following his talk, Gary was asked, “Can your model of sustainability at Stoneyfield Farm work outside of the natural foods industry?” His reply was not only can it work, but it, “Must work!” Gary believes that if we are to avert the global environmental crisis, it is essential that business be an integral part of the solution.

Although Gary’s mandate is to the business world in general, the real estate investment community, as shapers of the built-environment has a unique opportunity in advancing and extending Sustainability. If we embrace this challenge, the question becomes how can this model for sustainability be applied to real estate development and investing? The TripleBottomLine suggests there are three lenses through which we view financial success or failure. Applying this model to real estate investing, there are three hurdles for a project to qualify as “Sustainable”.


As with any business venture, a sustainable real estate investment needs to make economic sense. Traditional single-bottom-line financial analysis looks at profitability, measured by NOI, profit-before-tax, cash-flow, return on investment, capitalization rate and /or internal-rate-of-return. TripleBottomLine analysis uses these tools as well. When applied skillfully and appropriately they are very useful measures for evaluating a real estate investment from a financial viewpoint. As with any financial projection, the quality of the results rest directly upon the quality of the underlying assumptions. TripleBottomLine analysis includes this form of rigorous financial number-crunching, but does not stop here.


The second bottom line deals with the benefit of the project to society. How does an investor get her/his arms around something as broad and subjective as social fairness? The short answer is, “It’s not easy.” However, if we agree that there is value (or negative value) of a project in terms of social enrichment, then it is possible to create qualitative and quantitative evaluation tools. Devices are available to measure quality job creation, sense of community, connectedness vs. isolation, and aesthetic contributions flowing from the project under consideration. Even if we use strictly qualitative tools, the very process of considering a project’s benefit to society will influence the decisions around which projects are selected for investment and which are not.


The third bottom line looks at an investment from the viewpoint of ecological health. As in the first and second bottom lines, this third factor, environmental vibrancy (or destruction) can be evaluated and measured. Tools are available to measure a project’s utilization of renewable energy, its contribution or reduction to sprawl, and its impact on global warming. The focus of the third bottom line is not whether or not growth should occur, the focus is on what form growth should take.

Two vocal and talented proponents of sustainable project design are architect, William McDonough and chemist, Michael Braungart. In their book published in 2002 entitled, “Cradle to Cradle”, McDonough and Braungart argue that good design is more than being less bad. In other words, good design leads to buildings and products that do more than just pollute less or destroy less natural habitat. Good design leads to buildings and products that actually enrich and nourish all of life. Examples of this would be a real estate project that creates more vibrant wildlife habitat than there existed prior to the project or a building which captures more solar energy than it uses, and puts electrical power back into the grid or an automobile powered with a renewable fuel resource producing emissions that actually nourish the planet. Is this just a dream a few revolutionary thinkers or a real possibility for the mainstream?

Fort Motor Company Example. Some very large established corporations are embracing sustainability in the design and construction of their facilities. Included among them is Ford Motor Company. The Ford Rouge Center in Dearborn, Michigan was designed by William McDonough + Partners. The landscape design enables an orderly flow of people and materials, while creating an eco-system that filters the millions of gallons of stormwater and reestablishes wildlife habitat. In the words of Bill Ford, Chairman and CEO of Ford Motor Company, “The goal… was to transform our Rouge complex – which was built more than 85 years ago as the world’s first totally integrated manufacturing site – into a model of sustainable manufacturing. To do that we combined advanced environmental technologies within a world-class lean manufacturing center.” For more information on the Fort Rouge Center, please visit .

Professional Associations for Sustainability

For real estate investors and practitioners who are interested in Sustainability, there are professional associations to assist. The U.S. Green Building Council has established LEED (Leadership in Energy and Environmental Design). Their Green Building Rating System® is a voluntary, standard for developing high-performing, sustainable buildings. This rigorous certification process provides a framework for evaluating this “third bottom-line”. For more information on LEED, please visit In addition, in Colorado, we have the Colorado Green Building Guild which is an association of building professionals interested in promoting healthy and energy-efficient homes and workplaces.

This brief overview of the TripleBottomLine applied to real estate investing raises important questions. Are these three hurdles in opposition to one another or mutually supporting? Does this mean getting turning ones investment analysis into mush, thereby weaken its integrity? Does one have to give up strong financial returns in order to get strong social and environmental returns?

When Gary Hirshberg of Stoneyfield Farm Yogurt was in Boulder, he gave the example of a project they embraced to dramatically reduce waste generated from yogurt containers. The packaging change replaced the tradition plastic container tops with a thin film. As Gary described it, the change not only dramatically reduced waste that was heading toward landfills or recycling centers, but instantly saved Stoneyfield millions of dollars per year. This is an example of how what is good for the planet can be very good for the shareholders.

I am not aware of any studies that have compared the financial returns of sustainable real estate projects to those which employ the traditional single-bottom-line. However, if we look to stock equity funds, we do have data to compare. Domini Social Investments states their objective as, “We (Domini) are an investment firm specializing exclusively in socially responsible investing. We manage more than $1.8 billion in assets for individual and institutional investors who wish to integrate social and environmental criteria into their investment decisions.” Information in the Domini annual report to shareholders indicates the Domini Social Equity Investment fund showed a 10-year average rate of return of 10.86% just behind the Standard & Poors 500 of 11.50%.

In Bill Ford’s words, “Improved sustainability performance is not just a requirement, but a tremendous business opportunity. I want our Company (Ford) to be a leader in driving the transition and to be in a position to benefit from it.” As we approach April 22, 2005, the 35th anniversary of Earth Day, we in the real estate profession have an opportunity to consider how we are contributing to and benefiting from Sustainability.