Given the current state of technology, a variety of industries have significant opportunities to reduce energy consumption as a means both to lower costs and to offer investors an attractive return. By directing more capital to investments with a demonstrated rate of return, investors can drive revenue growth. According to the McKinsey Global Institute, energy efficiency alone represents a $170 billion per year investment opportunity, of which $97 billion will come from developing countries.
On average, investments in energy productivity improvements would yield a 17 percent internal rate of return from future energy savings. Additionally, this capital outlay of $170 billion is feasible, representing only 1.6 percent of global fixed capital investment.
Two major cross-industry initiatives in which financial services firms may consider investing are:
- Combined heat and power generation.
- The optimization of electric motors.
These initiatives yield an internal rate of return of 36 percent and 35 percent, respectively.
In addition, real estate investment trusts have a significant business opportunity to reduce costs by improving the energy efficiency of their operations. It is estimated that, in the coming decades, real estate investment trusts will own approximately 30 percent of all commercial property. Real estate investment trusts can benefit from economies of scale due to the numerous properties in their portfolios. One of the best ways to boost portfolio value based on internal growth is through energy-related investments like lighting retrofits and upgrades to heating, ventilation, and air conditioning.