Monte Carlo Cash Flows and Sustainability: How to Decide on Going Green

Green, sustainable or energy-efficient buildings apparently outperform other buildings with respect to rental level, value, and/or occupancy rates according to empirical findings. Most studies focus on commonly accepted databases to analyze the value or rent differences from a top-down perspective, that is, investigating value or rent differences between subject and control groups. But the decision-making problem at hand is mainly omitted from detailed discussions. We propose a framework using cash flow simulations in order to mirror the decision-making problem that owners face. By enabling both costs and benefits in different ways as inputs to a simulation model, we set up a large variety of realistic scenarios. We also consider findings and indications from previous decision modeling research. Our approach may be employed at all levels of detail that is needed and assists in economic-based decisions for sustainable investing.