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Sustainability and Your Financial Strategy

Businesses exist to make money. So they need solid reasons to invest in sustainability.

Hotels are not in the business of saving the planet. I’m not implying that the human beings who manage these properties don’t care about the environment or are ignorant of the adverse effects of climate change. I’m confident that as individuals, they care and are cognizant of climate change.

However, there has to be a business case for implementing sustainable practices at hotel properties.

I found myself reading with interest a publication from the Sustainable Hospitality Alliance, entitled, Business Case for Sustainable Hotels. It’s crammed with data and pearls of insights.

My goal in this month’s post is to take a somewhat deep dive into one facet of making the business case for hotel investment in sustainability: financing.

“Future-proof” is a buzzword that has made its way into the narrative. It is essentially the concept of making wise investments with a look to future outcomes, ensuring that today’s investments won’t be significantly devalued down the road.

I’m going to take a brief detour and state that the global hospitality industry has already committed to a series of sustainability goals based on the larger UN Sustainable Development Goals. This is key to the concept of “future-proofing” an investment.

Three financial tools incentivize hoteliers to pay attention to sustainability efforts. They are:

Local Financing
Sustainability-Linked Loans
Capital markets investments

Local Financing
Hotels can secure local project financing for “green” upgrades and improvements. We at Telkonet like to tout the robust ROI that typically comes with an EMS investment. Hoteliers can repay loans with the energy savings reaped by their new EMS platforms. The beauty of an advanced, technologically powerful energy management platform is that the astounding amount of data it can collect can be used to prove energy savings.

Sustainability Linked Loans (SLLs)
I love creative win-win solutions, and this seems to be one of them. As explained by Sustain Analytics, “SSLs give borrowers the opportunity to apply the loan toward general business purposes as the terms are tied solely to the borrowers ESG-related performance and not the use of proceeds or the projects financed. This flexibility has made the SLL a popular alternative to traditional capital raising and debt.”

We at Telkonet know from our experience with rebates that proving energy savings is difficult and complicated. It’s not impossible however if you have the right technology. See my comment above about EMS and data collection.

Capital Markets
And finally, capital investments. Capital investors’ emphasis on sustainability is growing. Altruism is not the driving factor; it’s a business decision. Capital investors recognize that in the future, there will be a much greater emphasis on sustainability. They are increasingly inclined to consider carbon emissions and climate effects when assessing risk.

In fact, in 2021 Moody’s added climate-related data sets to their assessments. Their press release begins with this statement:

“Moody’s ESG Solutions today announced the launch of its Temperature Alignment Data, a net zero solution which assesses how companies’ emissions targets align with global temperature benchmarks and their progress in meeting those targets.”

The press release continues, “Rising concern about the effects of climate change has increased pressure on investors, companies, and governments to contribute to the energy transition and demonstrate measurable action toward achieving emissions targets,” said Andrew Grant, Vice President – Climate Solutions in Moody’s ESG Solutions Group.”

Hotels that aren’t on board with more responsible sustainability practices are at future risk of negatively affecting their credit ratings, facing increased insurance premiums, and even risking their ability to raise funds.

The fact that these financial tools even exist and that they’re growing in popularity is a testament to just how seriously financial investors take sustainability and the future of all industries, not just hospitality.

We all have to get on board for the good of the planet AND the bottom line.

Telkonet can help you get on board. Contact one of our sales representatives today. or 888-703-9398.

All aboard!