What are the pros and cons of investing in energy-efficient buildings? An energy-efficient property can help save money while reducing its carbon footprint. According to the U.S. Energy Information Administration, residential and commercial buildings account for 39% of energy consumption in the U.S., meaning there is plenty of room for improvement.

Key Takeaways

  • With socially responsible investing an increasingly popular demand, green investing has extended to the real estate sector and energy-efficient buildings.
  • These buildings are designed to reduce energy use and cut down on waste and emissions.
  • As with every investment, investing in this space has both its pros and cons - such as the fact that environmental benefits may come with added economic cost.

Is It Worthwhile to Invest in Energy-Efficient Buildings?

Whether your interest in green investing is to help the environment, financial or both, the question from an investing perspective is whether following your environmental principles will hurt or help you financially. Here are the pros and cons.

Costs

Pro: Green buildings in the right locations can realize zero utility bills as long as the sun and rain cooperate. A tax credit of 30% is available for solar electric systems, solar water heaters, geothermal heat pumps, small wind turbines and fuel cell systems placed into service before the end of 2020. The credit falls to 26% in 2021 and 22% in 2022. A green building may have a higher appraised value, making resale easier.

Con: Building a green home is usually costlier up front, although some costs can be recovered through tax credits, energy savings and reduced repair bills. Do the math and see if increased construction costs balance against potential long-term savings.

Living or Working in a Green Building

Pro: Green buildings are healthier because they are built with natural products that have fewer dangerous chemicals. This can decrease allergies, asthma and other respiratory problems, saving health costs. In addition, the higher-quality building materials are more durable and should require fewer repairs. 

Con: Cooling components use natural resources that don’t give the homeowners full control over temperatures. It is important to position the building for optimum use of these resources, which could mean that shades or blinds would need to be installed, and you might have to position the building on the lot in a way you would not prefer. 

Using Natural Resources

Pro: Green buildings depend on the sun, wind and geothermal energy so there is reduced dependence on conventional sources of energy. This reduces the carbon footprint.

Con: You must build in a location that allows you to take advantage of these natural resources. For example, your preferred lot may not be a good choice, because nearby trees or buildings could block the sun. (This also makes you vulnerable to changes in neighboring structures that produce unwanted shade.) Also, your architectural design may not be conducive to solar panels. Buildings that intend to use wind or geothermal energy sources have other location and positioning limits.

Return on Investment

Pro: Green buildings, because of the materials used, have an increased lifespan, providing a better return on investment. 

Con: The price tag for building can be quite expensive, requiring accurate figures on construction and long-term-usage costs. 

Materials

Pro: Green buildings use more efficient and renewable materials for construction, such as straw, recycled metal, concrete, sheep's wool, compressed earth blocks, lumber and bamboo. All these are recyclable, reusable and nontoxic. The green construction produces 50% to 90% less waste than standard construction. 

Con: Building materials can be more expensive.

The Bottom Line

If you decide to construct a green building, it will cost you more initially. However, you could benefit from higher appraisal value, easier resale and savings in running costs for the life of the building, as well as helping to reduce global warming.