E NERGY S TAR ® : Helping You to Compare Corporate Energy Efficiency Performance Sol Salinas Director of Strategic Planning and Marketing U.S. EPA E NERGY.

EENERGYNERGY S STARTAR®®: Helping You to : Helping You to Compare Corporate Energy Compare Corporate Energy

Efficiency PerformanceEfficiency Performance

Sol Salinas

Director of Strategic Planning and Marketing

U.S. EPA ENERGY STAR® Buildings

Green Mountain SRI Summit

September 8-10, 2002

Stowe, Vermont

What You Already Know

• Global climate change (GCC) is a serious issue for the environment—and for investors.

• Assessing relative GCC performance is becoming a key element of minimizing investor risk exposure.

• Energy efficiency is critical to reducing GCC emissions.

• Analyzing relative corporate energy efficiency performance is an important element of GCC risk assessment.

Focus of Today

• Describe how a strategic approach to energy management is relevant to the companies you track.

• Introduce a new tool from ENERGY STAR® that can help you assess relative energy efficiency—and contribute to a pro-active approach to reducing global climate change risks.

The ENERGY STAR® You Know

Voluntary partnership between business, government, and others united in the pursuit of a common goal: to protect our environment for future generations by changing to energy-efficient practices today.

ENERGY STAR® is Everywhere

• Successful internationally

• Now on over 40 products, as well as on homes and buildings

• Many major retailers are promoting it, including: Sears, Circuit City and Best Buy

• Over 50 million products with the label were shipped last year

• Utilities are increasingly using the label: 30% of the US is now served by ENERGY STAR® Utility partners

Success: (through 2001)

Over 9,500 participants

13 billion square feet recruited (17 percent of nation)

7.4 annual MMTCE reduced (equivalent to emissions of 5MM cars

Success: (through 2001)

Over 9,500 participants

13 billion square feet recruited (17 percent of nation)

7.4 annual MMTCE reduced (equivalent to emissions of 5MM cars

Promoting Good Energy Management

Companies Among Most Admired and in CERES

• 23% of FORTUNE 500 in ENERGY STAR® , but 35% of FORTUNE 100 Most Admired in ENERGY STAR®

• 50% of CERES who are in Most Admired are in ENERGY STAR®

• 30% of 100 Best Corporate Citizens* and 50% of the top 10 are in ENERGY STAR®

* A screened listing of 650 public companies including the S&P 500; Source: Business Ethics Magazine based on KLD data

Partners of the Year

Evolution of ENERGY

STAR®

• Technology-based Projects

• Cost Savings

• Payback, IRR, NPV

• Pollution Prevention

• Strategic Energy Management

• Shareholder Value

• Cash flows

• Image in Marketplace

• beta

1991 2002

Industry Energy Performance

ENERGY STAR® Long Term

Facility Energy Performance

Corporate Energy Performance

Provide Infrastructure to Link Facility Energy Performance to Corporate—and Industry— Performance

Vast Differences in Energy Performance

• 800 U.S. office buildings and schools have earned the ENERGY STAR®

• The highest performing buildings use four times less energy than those that are at the bottom of the performance scale.

Corporate Energy Performance Benchmarks

• Initiative started in Fall 1998

• Goals:

– Raise awareness of link between energy performance and financial performance among CEOs, CFOs, financial community

• The companies that do the best in ENERGY STAR® are the ones with support from the top down.

– Provide tools for measuring corporate-wide energy and financial performance and not just individual buildings.

– Provide a method for assessing energy expenditures in comparison to other companies.

ENERGY STAR® Metrics

• Suite of 5 metrics:– Energy to Sales

– Energy to Cash flow

– Energy to Net Operating Income

– Energy to Operating Expenses

– Energy to Assets

• 26 industries

• Developed in conjunction with D&B based on modeled estimates of energy expenditures and actual reported financial information.

The Metrics Explained

Hypothetical Index for “Your Company” Relative to Industry

What the Metrics Reveal

• Overall measure of energy efficiency and intensity, both with an industry and a firm

• Within an industry, firms that use energy more efficiently will have lower values

• Can be used to assess operating efficiency and business risk.

Go To: Energy Sales Index Energy Operating Index Energy Income Index Energy Exposure Index Energy Asset Index

Number of Companies - 312

Domestic Facilities Index - 98.5

To calculate your company’s numbers Use the Self-evaluation worksheetObtain the data from Dun & Bradstreet

Energy Sales Index for the Grocery Industry (SIC 5411)

Energy Sales Index (ESI) Formula: Energy Sales Index = Energy Expenditures/Sales X 100

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•Looks at the relationship of energy expenditures to sales by calculating the amount spent on energy for every dollar of sales.•This is an overall measure of energy efficiency and intensity, both within an industry and a firm. •Industries that use a great deal of energy in production or sales will have higher Energy Sales Index values. Within an industry, firms that use energy more efficiently will have lower values. The lowest quartile contains firms with values ranging from 0.1 to 0.6 •Energy Sales Index can be used to assess Operating Efficiency and Business Risk

How SRI Community Can Use the Metrics

• Use consistent superior performance on metrics as indicator of good energy management.

• Encourage companies you invest in to become an Energy Star partner.

• Bring ratings to the attention of CEOs, CFOs and other top decision makers.

• Demand this information from the companies you track.

• Use metrics as criteria in positive SRI screens.

Status and Next Steps

• Input from financial and SRI communities– Calvert, IRRC, FTSE, Domini, KLD, PaxWorld, Citizens Funds,

Trillium Asset Management, CERES, Harris, Bretall & Sullivan, Parnassus, State Street Global, Barclays Global Investors, BSR, Salomon Smith Barney, Neuberger Berman, Dreyfus

• EPA launch date: Fall 2002.

• Future: Alliances with independent financial information providers.

• Additional metrics

• Relate to climate change performance

Encouraging Energy Performance

“Wall Street is not the place most environmentalists look to for help in their fight against global warming. But like the climate, that may be changing.”

Work with Us

WWW.ENERGYSTAR.GOVWWW.ENERGYSTAR.GOV

1-888-STAR-YES1-888-STAR-YES

[email protected]@epa.gov