A Worthy Investment: Retrofits as a Path to Net-Zero
-
bookmark
-
print
To do their part to meet Canada’s net-zero emissions goals, commercial real estate operators and developers are increasingly incorporating energy efficiency measures into their buildings and projects. The scope of the challenge is significant—globally, buildings and construction account for nearly 40% of carbon emissions.1 In Canada, approximately 10 million buildings can benefit from energy efficiency retrofits.2
Retrofits are retroactive improvements to building systems and fixtures designed to generate savings on utilities while simultaneously cutting carbon emissions.
Going retro
Retrofits include improvements to various energy-consuming building systems and fixtures. For example:
-
Upgrading from a gas-fired furnaces to heat pumps can bring huge efficiency gains. A heat pump can transfer 300% more energy than it consumes.
-
The installation of digital building control systems that can remotely monitor building temperature, humidity and light levels are a minimally invasive way of optimizing building performance.
-
Lighting upgrades can offer rapid financial payback through the replacement of incandescent lamps with LEDs, installing wireless motion sensors, or reconfiguring windows or interior spaces for better daylight harvesting.
-
Building envelope enhancements (e.g., replacing windows and doors with energy-efficient models, adding weatherproofing, installing cladding and improved insulation) can significantly lower HVAC loading.
Betting on future benefits
When done well, energy efficiency retrofits offer a spectrum of benefits, including:
Financial
-
Reduced operating expenses through lower water, gas and electricity usage; reduced operation and maintenance expense with newer, more reliable equipment.
-
Increased revenue from higher base rental income commensurate with a better tenant value proposition (e.g., healthier environment, reduced utility bills); reduced vacancy allowance.
-
Capital appreciation of properties through modernization and certification, yielding higher resale value or improved cap rate.
-
Reduced risk to future earnings, e.g., loss of equipment value due to functional obsolescence.
-
ESG leadership can help attract and retain best-in-class employees, customers and tenants.
Environmental
-
Greenhouse gas emissions reductions, typically 20% to 60%
-
Reduced water usage, typically 20% to 30%.
Quality of life
-
More comfortable ambient temperatures and more natural daylight.
-
Respiratory benefits from improved air quality.
-
Greater resilience during blackouts or natural disasters.
Regulatory
-
Compliance with growing energy efficiency targets, regulations and standards, such as LEED.
-
Strategic positioning to minimize tax exposure—the federal carbon tax is scheduled to increase from $50 per ton in 2022 to $170 per ton in 2030.
Illustrative case studies
Industrial
The client: A design and engineering firm specializing in manufacturing and distribution of engineered protective textiles that operates out of a 52,000-square-foot facility. Key challenges included poorly sequenced and inefficient heating/cooling systems resulting in excess energy consumption; high manual workload to operate and maintain equipment; sub-optimal building comfort levels.
The retrofit: Automated 37 lighting, gas and HVAC systems, as well as electric baseboards.
The results: Financial: The cost of the project was recouped through energy savings in about five years with an internal rate of return (IRR) of 16% and a net present value (NPV) of $100,000. Environmental: Reduced greenhouse gas emissions by 56 metric tons annually.
Office
The client: A multinational defence contractor’s 312,000-square foot facility for one of its key operating divisions. The key goals for the project included lowering utility costs and greenhouse gas emissions, improving occupant comfort and reducing the building’s energy intensity.
The retrofit: Made improvements to lighting. Replaced fuel oil steam boilers with units powered by natural gas. Installed 29 wall-mounted electric setback thermostats with occupancy-sensing capability to provide separate heating settings for occupied and unoccupied conditions. Installed a boiler stack economizer to reclaim stack heat that would otherwise be lost to atmosphere. Sealed gaps in the building envelope to control air leakage.
The results: Financial: In the nine years since the retrofit, the project has achieved an annual savings of ~$450,000, a figure which exceeded the original forecasted savings. In doing so, the project achieved an NPV of nearly $730,000 with an IRR of 11%. Environmental: Over nine years, total estimated greenhouse gas savings were 2,802 tons of carbon dioxide. Savings of 1.7 million therms of natural gas, 6.5 million kWh in electricity and 1.2 million gallons of fuel oil were also achieved.
Multifamily residential
The client: A residential complex with 28 townhomes and a 123-unit tower. Many of the building’s fresh air and heating systems were close to the end of their service life and in significant need of renewal. The project aimed to reduce carbon emissions by at least 30%, realize $65,000 in annual utility savings, address deferred maintenance priorities and improve the indoor environment for residents.
The retrofit: Reduced water consumption through low-flow showerheads, faucet aerators and three-litre water closets. Replaced existing boilers with two high-efficiency models for domestic hot water and one condensing boiler for space heating. Replaced domestic cold water booster pumps with variable frequency drive-equipped models. Lowered electricity consumption from appliances by replacing original refrigerators and stoves with high-efficiency models. Installed corridor lighting with lower wattage T8 fluorescent tubes and added motion sensors in some common spaces.
The results: Financial: The retrofit project achieved nearly $93,000 in annual cost savings representing a 20% reduction in total utility costs, far exceeding the initial goal of $65,000 in annual utility savings. Environmental: The project reduced carbon emissions by 30%, or an average of 209 tonnes of carbon dioxide per year.
With retrofitting multifamily residential development being an essential component of Canada’s emission’s reduction plan, this example proves that the cost of a retrofit that can help the environment can also yield continued savings for building owners that can more than pay for the additional investment.
- Minute Read
- Listen Stop
- Text Bigger | Text Smaller
To do their part to meet Canada’s net-zero emissions goals, commercial real estate operators and developers are increasingly incorporating energy efficiency measures into their buildings and projects. The scope of the challenge is significant—globally, buildings and construction account for nearly 40% of carbon emissions.1 In Canada, approximately 10 million buildings can benefit from energy efficiency retrofits.2
Retrofits are retroactive improvements to building systems and fixtures designed to generate savings on utilities while simultaneously cutting carbon emissions.
Going retro
Retrofits include improvements to various energy-consuming building systems and fixtures. For example:
-
Upgrading from a gas-fired furnaces to heat pumps can bring huge efficiency gains. A heat pump can transfer 300% more energy than it consumes.
-
The installation of digital building control systems that can remotely monitor building temperature, humidity and light levels are a minimally invasive way of optimizing building performance.
-
Lighting upgrades can offer rapid financial payback through the replacement of incandescent lamps with LEDs, installing wireless motion sensors, or reconfiguring windows or interior spaces for better daylight harvesting.
-
Building envelope enhancements (e.g., replacing windows and doors with energy-efficient models, adding weatherproofing, installing cladding and improved insulation) can significantly lower HVAC loading.
Betting on future benefits
When done well, energy efficiency retrofits offer a spectrum of benefits, including:
Financial
-
Reduced operating expenses through lower water, gas and electricity usage; reduced operation and maintenance expense with newer, more reliable equipment.
-
Increased revenue from higher base rental income commensurate with a better tenant value proposition (e.g., healthier environment, reduced utility bills); reduced vacancy allowance.
-
Capital appreciation of properties through modernization and certification, yielding higher resale value or improved cap rate.
-
Reduced risk to future earnings, e.g., loss of equipment value due to functional obsolescence.
-
ESG leadership can help attract and retain best-in-class employees, customers and tenants.
Environmental
-
Greenhouse gas emissions reductions, typically 20% to 60%
-
Reduced water usage, typically 20% to 30%.
Quality of life
-
More comfortable ambient temperatures and more natural daylight.
-
Respiratory benefits from improved air quality.
-
Greater resilience during blackouts or natural disasters.
Regulatory
-
Compliance with growing energy efficiency targets, regulations and standards, such as LEED.
-
Strategic positioning to minimize tax exposure—the federal carbon tax is scheduled to increase from $50 per ton in 2022 to $170 per ton in 2030.
Illustrative case studies
Industrial
The client: A design and engineering firm specializing in manufacturing and distribution of engineered protective textiles that operates out of a 52,000-square-foot facility. Key challenges included poorly sequenced and inefficient heating/cooling systems resulting in excess energy consumption; high manual workload to operate and maintain equipment; sub-optimal building comfort levels.
The retrofit: Automated 37 lighting, gas and HVAC systems, as well as electric baseboards.
The results: Financial: The cost of the project was recouped through energy savings in about five years with an internal rate of return (IRR) of 16% and a net present value (NPV) of $100,000. Environmental: Reduced greenhouse gas emissions by 56 metric tons annually.
Office
The client: A multinational defence contractor’s 312,000-square foot facility for one of its key operating divisions. The key goals for the project included lowering utility costs and greenhouse gas emissions, improving occupant comfort and reducing the building’s energy intensity.
The retrofit: Made improvements to lighting. Replaced fuel oil steam boilers with units powered by natural gas. Installed 29 wall-mounted electric setback thermostats with occupancy-sensing capability to provide separate heating settings for occupied and unoccupied conditions. Installed a boiler stack economizer to reclaim stack heat that would otherwise be lost to atmosphere. Sealed gaps in the building envelope to control air leakage.
The results: Financial: In the nine years since the retrofit, the project has achieved an annual savings of ~$450,000, a figure which exceeded the original forecasted savings. In doing so, the project achieved an NPV of nearly $730,000 with an IRR of 11%. Environmental: Over nine years, total estimated greenhouse gas savings were 2,802 tons of carbon dioxide. Savings of 1.7 million therms of natural gas, 6.5 million kWh in electricity and 1.2 million gallons of fuel oil were also achieved.
Multifamily residential
The client: A residential complex with 28 townhomes and a 123-unit tower. Many of the building’s fresh air and heating systems were close to the end of their service life and in significant need of renewal. The project aimed to reduce carbon emissions by at least 30%, realize $65,000 in annual utility savings, address deferred maintenance priorities and improve the indoor environment for residents.
The retrofit: Reduced water consumption through low-flow showerheads, faucet aerators and three-litre water closets. Replaced existing boilers with two high-efficiency models for domestic hot water and one condensing boiler for space heating. Replaced domestic cold water booster pumps with variable frequency drive-equipped models. Lowered electricity consumption from appliances by replacing original refrigerators and stoves with high-efficiency models. Installed corridor lighting with lower wattage T8 fluorescent tubes and added motion sensors in some common spaces.
The results: Financial: The retrofit project achieved nearly $93,000 in annual cost savings representing a 20% reduction in total utility costs, far exceeding the initial goal of $65,000 in annual utility savings. Environmental: The project reduced carbon emissions by 30%, or an average of 209 tonnes of carbon dioxide per year.
With retrofitting multifamily residential development being an essential component of Canada’s emission’s reduction plan, this example proves that the cost of a retrofit that can help the environment can also yield continued savings for building owners that can more than pay for the additional investment.
Conference
You might also be interested in
Why Sustainability Is Good Business: Key Takeaways from IEFA Toronto 2024
Building for Tomorrow: Real Estate, Construction, and Sustainability
A First in Western Canada: Avenue Living Leverages BMO's Retrofit Program to Add 179 New Rental Units in Downtown Edmonton
How NASA and IBM Are Using Geospatial Data and AI to Analyze Climate Risks
BMO Arranges Green Financing to Fund New Lawson Centre for Sustainability, Trinity College's Most Significant Build in a Century
BMO ranked one of the most sustainable companies in North America on the Dow Jones Sustainability Indices
Canada Has an Opportunity to Become a Global Leader in Carbon Dioxide Removal
More Companies Have Plans to Address Climate Change Based on Rising Business Importance: Survey Results
BMO Climate Institute Business Leaders Survey: Nearly Half of Business Leaders in the U.S. and Canada Believe Climate Change Has Already Affected Their Businesses, but Few Have a Strategy
How the Energy Sector Is Helping Canada Achieve Its Decarbonization Goals
Transforming the Global Food System to Benefit Investors and the Planet
Why Businesses Need to Accelerate Their Efforts to Fight Climate Change
BMO Donates $3 Million to GRID Alternatives to Provide Solar Energy Solutions for Low-Income Families
Banco do Brasil and BMO Financial Group to Introduce First-of-its-Kind Program to Provide Sustainability-Linked Trade Loans Supporting Brazilian Exporters
BMO Provides Innovative New Sustainability-Linked Deposit Product to Zurn Elkay Water Solutions
Quick Listen: Michael Torrance on Empowering Your Organization to Operationalize Sustainability
BMO and Bell Canada Execute Innovative Sustainability-Linked Derivative Tied to Ambitious GHG Emission Reduction Targets
BMO Named to UN-Convened Group Providing Guidance to Global Banks on Nature Target Setting
Driving Innovations In Tech To Strengthen Climate Resilience With Climate Engine’s Spatiafi, Built On Google Cloud
BMO Celebrates Earth Day with 3rd Annual Trees from Trades Day on its Global Trading Floors
BMO Donates $2 Million to the University of Saskatchewan to Accelerate Research Critical to the Future of Food
North America’s Critical Minerals Advantage: Deep Dive on Community Engagement
Rock Legends Reflect on Mining Hits and Misses: Global Metals, Mining & Critical Minerals Conference
The Most Valuable Commodity is Trust: ICMM to BMO Global Metals, Mining & Critical Minerals Conference
Exploring North America’s Critical Minerals Advantage: Global Metals, Mining & Critical Minerals Conference
BMO Experts at our 32nd Global Metals, Mining & Critical Minerals Conference
Evolving Mining for a Sustainable Energy Transition: ICMM CEO Rohitesh Dhawan in Conversation
Public Policy and the Energy Transition: Howard Learner in Conversation
Taskforce on Nature-Related Financial Disclosure (TNFD) – A Plan for Integrating Nature into Business
Takeaways from the BMO Climate Institute Small and Mid-Sized Businesses Climate Survey
BMO Ranked North America's Most Sustainable Bank by Corporate Knights for Fourth Consecutive Year
Is Green Financing for Nuclear the Next Frontier in the Energy Transition?
BMO ranked one of the most sustainable companies in North America on the Dow Jones Sustainability Indices
BMO Climate Institute Survey Shows Costs and Competing Priorities Slowing Climate Action for Small and Mid-Sized Businesses
Managing and Monetizing Your Transition to a Net Zero World with BMO and Radicle
BMO the Top Ranked Financial Institution on New Global Sustainability Benchmark Announced at COP 27
COP27 in Focus: Will Energy Security and Economic Uncertainty Impact the Climate Transition?
BMO to Invest in Innovative Carbon Offsets from CarbonCure to Permanently Store CO2
RoadMap Project: An Indigenous-led Paradigm Shift for Economic Reconciliation
A Canadian First: BMO and Concordia University Partner for a Sustainable Future with Innovative Sustainability-Linked Loan
Sustainability Strategy and Reporting for Small and Medium Sized Companies: A Discussion at the Conference of Montreal
BMO to Acquire Calgary-based Radicle Group Inc., a Leader in Environmental Services
Investment Opportunities for a Net-Zero Economy: A Conversation at the Milken Institute Global Conference
How Hope, Grit, and a Hospital Network Saved Maverix Private Capital Founder John Ruffolo
Hydrogen’s Role in the Energy Transition: Matt Fairley in Conversation
Exploring the Physical and Transition Risks Facing Food and Agriculture
Key Takeaways on Ag, Food, Fertilizer & ESG from BMO’s Farm to Market Conference
Building an ESG Business Case in the Food Sector: The Food Institute
Forging Ahead in the Energy Transition: Darryl White to Global Reserve and Asset Managers
BMO and EDC Announce Collaboration to Introduce Sustainable Finance Solutions for Canadian Businesses
Retrofitting Canada's Building Sector: Efficiency Canada’s Corey Diamond in Conversation
The Role of Hydrogen in the Energy Transition: FuelCell Energy CEO Jason Few in Conversation
BMO proud to support first Government of Canada Green Bond transaction as joint-lead manager
Op Ed: Government Action Can Help Spur More Home Building To Address Canada’s Housing Shortage
Tackling Climate Change in Metals and Mining: ICMM CEO Rohitesh Dhawan in Conversation
BMO Launches Business Within Reach: BMO for Black Entrepreneurs and Commits $100 million in loans to Help Black-led Businesses Start up, Scale up, and Grow
The Post 2020 Biodiversity Framework – A Discussion with Basile Van Havre
BMO Announces Plan to Partner with Breakthrough Energy Catalyst to Accelerate Climate Innovation
BMO Financial Group Named North America's Most Sustainable Bank for Third Consecutive Year
Mitigating the Physical Impacts of Climate Change with Spatial Finance
BMO Helps Boralex Go Beyond Renewable Energy, with the Transition of its Credit Facility to a Sustainability-Linked Loan
A Global First: BMO Supports Bruce Power with World's First Nuclear Green Financing Framework
BMO ranked one of the most sustainable companies in the world according to Dow Jones Sustainability Indices
The Future of Remote Work and Diversity in the Asset Management Industry
North American Metals & Mining first: BMO helps Sandstorm Gold Royalties achieve ESG goals with Sustainability-Linked Loan
Education, Employment and Economic Empowerment: BMO Releases Wîcihitowin ᐑᒋᐦᐃᑐᐏᐣ- First Annual Indigenous Partnerships and Progress Report
BMO Announces $12 Billion Financing Commitment towards Affordable Housing in Canada
In support of Canada’s bid to host the headquarters of the International Sustainability Standards Board
BMO supports Canada's bid to host the headquarters of the International Sustainability Standards Board
BMO Named to Canada's Best 50 Corporate Citizens Ranking by Corporate Knights
A North American First: BMO Helps Gibson Energy Fully Transition Credit Facility to a Sustainability-Linked Loan
Understanding Biodiversity Management: Best Practices and Innovation
Episode 29: What 20 Years of ESG Engagement Can Teach Us About the Future
BMO Financial Group 2020 Sustainability Report and Public Accountability Statement Now Available Online
Episode 28: Bloomberg: Enhancing ESG Disclosure through Data-Driven Solutions
BMO Ranked Among Most Sustainable Companies on Dow Jones Sustainability Index - North America
BMO investing in a sustainable future with $1M donation to the Institute for Sustainable Finance
BMO Financial Group Reaches Key Milestone in Matching 100 Per Cent of Electricity Usage with Renewables
BMO Financial Group Recognized as One of the World's Most Sustainably Managed Companies in New Wall Street Journal Ranking
Episode 23: TC Transcontinental – A Market Leader in Sustainable Packaging
BMO Financial Group to Source 100 Per Cent of Electricity Usage From Renewables
Episode 07: World Bank: Mobilizing Capital Markets for Sustainable Finance
Episode 06: Responsible Investing – Industry Trends and Best Practices from Canada