More recently, Los Angeles-based Thomas Properties Group announced in the spring of 2008 that it had closed its first round of fundraising for the Thomas High Performance Green Fund with commitments of $180 million. The fund is earmarked for investments in high-performance, sustainable commercial buildings. Thomas began its green fund in the summer of 2006 with a goal of raising $500 million to acquire and redevelop properties to meet LEED standards.

TNP/SLI Green Building Fund's planned use as a financing vehicle fits the trend away from green equity investments toward green debt. Yet the launch of a new fund shows investors still see potential for profit in green building.

Houston-based Green Bank, for one, has turned sustainability into a vital part of its lending program. The community bank picked its name in 2006 to reflect the color of money, according to president and chief executive Geoffrey Greenwade. As customers and employees emphasized sustainability, the direct lender began to offer discounted fees and other services for green projects.

“In 2007 and 2008 this movement and momentum just took over,” he says. “We hired people who were passionate about it, and guess what? It becomes part of your bloodstream.”

Long-term profits

The recession and credit crunch provide more reasons for landlords to tackle energy-efficiency improvements, according to Doug Gatlin, vice president of commercial market development at the U.S. Green Building Council. As always, energy efficiency can reduce operating costs and boost an asset's net cash flow.

But a new incentive for investors stems from the longer asset hold periods brought on by the current dearth of building transactions. The longer a landlord expects to own a property, the greater the opportunity to recoup improvement costs over time through energy savings. “If they're going to hold the building longer, in a way it argues for going deeper with your energy-efficiency retrofits in existing buildings,” Gatlin says.

Experts expect green building, energy upgrades and carbon reduction programs to increase under the Obama administration, but the credit crunch is holding up progress for now. When lending begins to accelerate, green investment funds are likely to proliferate as well, says Elanjian.

“Over the next four to eight years, is this stuff going to thrive? Absolutely,” he says. “Is it going to do this over the next 12 to 24 months? Boy, that's hard to tell.”