Investors Soften When Shown The Green Bottom Line

Investment of any kind is about making money. This much is not in doubt. But can investment — and particularly real estate investment — be done both ethically and profitably? Of course it can. Many investors require some convincing of this — especially when it comes to real estate, where a hit-and-run approach was for a long time considered the surest and most lucrative investment bet, and where green investments have sometimes wrongly been regarded as a money pit, suitable only for the wealthy and ideologically inclined.

But, as we’ll see, real estate investors can be converted to put their money into more responsible and sustainable investments. You just have to know how to talk to them.

The Bottom Line Is The Bottom Line

Real estate is a frugal and often fierce game. Why is why the first thing investors will want to see when considering a new venture, green or otherwise, is a significantly profitable bottom line ROI (return on investment). If you’re pitching an environmentally sustainable approach to investors, you need to tell them right from the outset how this approach will make and save them money.

Let’s say you’re talking about solar panels. Instead of telling them how many penguins it might save, or how it’s their responsibility to do something for the greater good, cut straight to the hard numbers on how quickly the solar panels will pay for themselves. This will pique their interest. Explain to them how a house with lower utility bills will sell more quickly, and for a higher price.

Be as specific as possible. Show them how immediate the results will be. Assume that the investor in front of you doesn’t care about green anything, as much as you might want them to. Sell them on the basis of your numbers.

We rarely come across real estate investors suffering from a guilty conscience. Shrewd entrepreneurs look primarily at the numbers; this is often what’s made them successful. So steer clear of any sales pitch that relies on manipulating an investor’s guilt. This method can backfire spectacularly: in the short term, it can ruin your pitch; in the long-term, it can do the same for your reputation.

Of course, the numbers mightn’t always be there for green upgrades, especially when it concerns investment properties. So choose your proposals wisely. If, for any reason, adding an upgrade or doing a retrofit isn’t going to make the investor money in the foreseeable future, take it off the table. To investors, green needs to seem like a sound investment, not an ideological choice.

Jim Simcoe, of Simcoe Consulting, offers a handy visualization exercise to help get people get their green pitches right the first time.

“Assume [your investors] all drive Hummers, toss plastic bottles into the ocean and that every light in their house is on right now,” he says. “Then, figure out how your product or service will benefit them. If you can’t, then revisit what you’re offering.”

Keep It Simple

Part of adhering to this bottom line strategy is keeping it simple. Don’t bombard potential investors with needlessly technical details that don’t make obvious financial sense. You’ll only confuse them, and might even turn them off.

Show them how quickly the money they spend on a project will yield a return. Let’s say you want to propose increasing the efficiency of the building envelope (the barrier between conditioned and unconditioned space). To do this, you may decide to install high-efficiency windows and insulation in walls, ceiling, and floors. Relate this to your investor, but don’t get bogged down in detail, especially in your closing pitch.

This is the time to leave the technicians and long power point presentations at home. If you need to relate key technical details, present your charts and graphs on paper and send them home with your investor to contemplate. Your proposal should be all about telling your investor, as simply as you can, how it works, and how it will make them money.

In his book The Art of the Start, Guy Kawasaki talks about his experience as a venture capitalist. Over the years he was presented with hundreds of proposals, all claiming to be “the next big idea”. Kawasaki points out that most investment capital firms would much rather be shown a marketing strategy than a business plan. Typically, venture capitalists put business plans at the bottom of the pile, and look only at proposals that put hard conversion metrics first.

To sell green real estate to potential investors, whether it’s a simple green upgrade or an entire property, you need to always remember to show them the money. Keep it simple, and don’t for a second assume that the investors share your values. Disambiguate the entire project with exact profit margins, a clear return on investment, and tangible outcomes for every green decision you’re looking to make on a property.

Your prospects will love you for it. They’ll want to do more business with you in the future, and as they become profitable green real estate investors in their own right, so will you.

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