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Buildings are a major source of pollution – in the U.S. they account for 50 percent of carbon emissions.

Technology exists to change that; however, when it comes to real estate and development, the path to progress is being stymied by the three traditional pillars of appraisal: cash flow, comparable sales and replacement costs.

“This all hinges on the question of value, and valuation models – how we understand the market value of a piece of real estate, and how a particular investor might model the value of a particular piece of real estate,” said Stuart Cowan, a partner and co-founder of Autopoiesis LLC, an ecological design and planning firm in Portland.

Cowan is part of an elite team of industry professionals that along with an international advisory council has launched a new project – Economics of Change – to expand that model. The group is hoping to identify new accounting practices, valuation models and regulatory policies that more adequately capture the benefits of green building features.

Currently, building beyond Leadership in Energy and Environmental Design gold or platinum ratings doesn’t pencil out, said Jason Twill, vice chairman of the International Living Future Institute‘s board. ILFI is conducting the Economics of Change project.

The problem, Twill said, is that the current real estate model stems from the mid-1900s, when people considered natural resources limitless.

“We now know in our hyper-globalized world, heading towards nine billion people, that natural resources are not unlimited and they are hyper-constrained, and we have pushed the limits of growth,” Twill said, adding that what’s needed is a way to value natural resources like clean air and water. “All the things we take for granted that very fragilely and miraculously create life on our planet. We have an economic system that goes against that and corrodes that system.”

So, the plan is to create an open-sourced financial tool (think of an Excel spreadsheet or ARGUS Software model) to let investors test development assumptions. For instance, what is the value – to city officials – of treating stormwater on site and keeping it out of sewers? Or, what is the value – to county health officials – of eliminating toxic materials in buildings?

Twill hopes to have that tool ready for beta testing in about a year, when the team will look to partner with institutional investors like Deutsche Bank and GE Capital – those that hold sway in the industry and have already demonstrated commitment to ecologically minded investment.

Their involvement, Twill said, would initiate a conversation about policy and what needs to change to let investors capture value being left on the table. In Seattle, for instance, developers are given density bonuses if they can meet certain aspects of the Living Building Challenge – a rigorous building standard that calls for net zero energy, waste and water use (among other things).

“That’s something Portland should look at very seriously,” Cowan said. “The city doesn’t have any money at the moment, and that’s fine. Every municipality is struggling, so it doesn’t have to be cash. It can be density bonuses – ‘We will move heaven and earth to get the building permitted. What could be 12 months or more, we’ll get it down to six months.’ … Those are things that have enormous benefit to developers and zero cash cost to municipalities.”

Richard Graves, another Economics of Change team member and the executive director of the International Living Future Institute, said the Bullitt Center in Seattle – the world’s first urban office building on track to meet Living Building Challenge requirements – will provide the team real data to inform its financial model.

That could interest Interface Engineering, which is working with Gerding Edlen to develop a new, highly efficient and sustainable headquarters facility in Portland. Omid Nabipoor, Interface’s president, said in November that he aspired to meet Living Building Challenge criteria.

Putting real numbers (a la the Bullitt Center) on such a development proposition could significantly influence its viability. By nature, the appraisal industry relies on what it knows and it doesn’t know much about green building.

“Statistically, there is not that much empirical data that proves, as a lot of people believe, that high-performance, energy-efficient buildings are more valuable,” said Theddi Wright Chappell, a member of the Economics of Change research team and president of Park City, Utah-based Sustainable Values Inc. “There have been a number of studies done, but (they have been) pretty high level, and what results is the appraisal industry is left with very little actual, factual data.”

Cowan said that with the right valuation models, the ill-fated Oregon Sustainability Center might have succeeded. Once planned as a $120 million, 200,000-square-foot building, the idea petered out in the face of dwindling financial and political support.

Sustainability, Cowan said, shouldn’t have to be an item of debate.

“This needs to be something that every company can tap into,” he said. “My hope is that what is now a very small green investment community will become the norm. We want to get there in the next few years … so any developer in the U.S. can do a living building. But not because it’s a trophy building, but because it makes sense in the marketplace.”