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Can green buildings boost your financial performance?

<p>It turns out that green buildings may not only boost your company&#39;s image, but also could grow your revenue. A new study finds higher financial performance in LEED-certified bank branches.</p>

Ever since the introduction of LEED standards in 2000, the question of whether or not the certification adds to buildings' value – and how much – has been hotly debated. But evidence is mounting that building certification adds not only to real-estate income, but also to the asset value of real estate. GreenBiz's Green Building Market and Impact Report, released in November and written by me, summarizes some of the most recent evidence.

Now a very interesting new study from the University of Notre Dame indicates that having buildings certified as green properties may actually increase business in those facilities too.

The first-of-its-kind study, conducted by University of Notre Dame management professors Edward Conlon and Ante Glavas, compared the financial performance of 93 LEED-rated bank branches with 469 nonrated branches, all owned and operated by PNC Financial Services Group.

PNC Bank has years of experience with LEED. THE PNC Firstside Center in Pittsburgh was the first commercial building to get LEED certified back in 2000. Based on the success of that office building, the company quickly decided to embark on an aggressive campaign to certify its branches as well.

Factoring out newness

Superior financial performance of LEED certified properties is often dismissed due to the "newness" factor. In other words, people say, "of course people pay more; it’s newer."

To address this concern, the study only included buildings that were older than 3 years old. Researchers also compared certified and noncertified facilities with similar revenue and market demographics (including household density and net worth), advertising, total employees and average employee age, tenure and gender mix.

In the study, called "The Relationship Between Corporate Sustainability and Firm Financial Performance," Conlon and Glavas found that:

  • PNC’s LEED rated facilities opened 458 more consumer deposit accounts and had over $3 million more in consumer deposit balances per facility per year over noncertified properties.
  • LEED rated facilities also opened 25 more consumer loan accounts and had almost $1 million more in loan balances per facility per year. The data also shows that financial performance at LEED rated facilities increased at a greater rate than at conventional facilities.
  • After controlling for other variables that influence performance (such as consumer net worth, employee demographics, market demographics, branch size and age and advertising spending), the sales at LEED-certified branches topped those at noncertified locations by $461,300 per employee.
  • Utility costs per employee in LEED branches were significantly lower than in the noncertified buildings, to the tune of $675 less per employee.

Also very interesting is what the study didn't find: Business account activity was statistically unaffected by whether the branch was LEED certified or not.

'Quantifiable' business value

Why PNC? Conlon and Glavas noted that PNC was an ideal candidate for such a study for several reasons: It owns and operates the most newly constructed LEED buildings in the world, so it could provide a statistically significant sample of third-party-validated green buildings.

In addition, all branches provide the same products and services; the products themselves are not tied to environmental concerns; and the Green Branch program – in which its branches are LEED certified – is completely voluntary and not a response to government or industry regulations.

Tom Paladino, whose firm Paladino and Company collaborated with PNC to develop the Green Branch program, noted: "These findings show that return on investment in green building is not only quantifiable in terms of money saved on operational expenses, but that other 'intangibles' like the impact of sustainability on brand reputation may directly influence customer choices. While other studies have shown that employees are happier and more productive in green buildings, this study demonstrates the business value inherent in comprehensive and third-party-validated sustainability programs."

Photo of Modern building on white by Photostocker; photo of Businessman with a coin by Ioannis Pantzi via Shutterstock. Photocollage by GreenBiz Group.

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