Johnson Controls’ Chief Sustainability Officer, Katie McGinty Interviewed On CNBC Squawk Box Sustainable Future

Katie McGinty, the Vice President and Chief Sustainability and External Relations Officer at Johnson Controls, joined CNBC Co-Anchors - Karen Tso and Arabile Gumede for a live broadcast on June 30, 2023 to talk about: the imperative for decarbonization to tackle the 40% of global greenhouse gas emissions coming from buildings; the clean, green premium driving growth in the real estate sector; the AI revolution driving that transformation in buildings; and ESG as just good business to cut waste and accelerate growth.

• On the business opportunity of decarbonizing buildings:

So, the bad news is that buildings are 40% of global greenhouse gas emissions. But the good news is that there is the technology currently available to turn that equation around. It's a trifecta. It's about driving energy efficiency, it's about electrification of those buildings, and then – the AI conversation – it's about digitalization of the buildings.

The building goes from deadweight on the balance sheet to an organic asset

The further good news is when taking that technology to the building, it's not just solving a bad – cutting high energy bills, cutting carbon – it is driving the strategic purpose of the business. The building goes from deadweight on the balance sheet to an organic asset that can actually help to drive a business' purpose, attract employees, ensure a healthy productive work environment, and enhance the bottom line.

With shareholders now looking at climate change and saying, they want to know whether they have future-proofed those assets, the challenge becomes, really, an opportunity.

• How AI is driving the net zero building transformation:

So, when thinking of a car, it is essentially a computer on wheels now. Buildings are the opposite. Buildings are the least penetrated space in terms of things digital and data.

OpenBlue platform

The real revolution coming to buildings – and Johnson Controls’ platform called OpenBlue – is to grab that data and put it to work. And here's what happens. With the AI platform in a data center for example, they can find out that the chillers cooling that data center are not in sync. One slight adjustment and it's a 30% cut in the energy and the cost of that data center.

Or in a hospital, for example, the very same sensors gauge temperature and humidity to cut that HVAC system and cut the energy bill. Those same sensors detect and scrub out of the air germs and viruses!

Enhancing efficiency and productivity

So, again, with data, with AI, the world is enabling itself to solve a climate problem, but they're also bringing all kinds of efficiency and productivity, and driving organizational purpose.

When being smart about sustainability, enterprises roll-up their sleeves and say, where do they have waste in this business? Because every dollar needs to go to growing the business and not spending money on wasteful energy.

• Why real estate growth is clean and green:

It’s a good point. And it's not new to say that real estate is location, location, location. But a combination of location and the class of building, and that gives very different pictures.

What is being seen consistently, though, is that clean and green is earning a premium in the real estate space.

Enterprises go clean and green

Those kinds of clean and green properties are definitely earning a premium

This is certainly seen here in London, where people are paying up, both to prove that they are a purpose-driven organization and that they are values based, but also that when those employees come back to that workspace, with that digital platform, enterprises can guarantee the air is clean and healthy.

Those kinds of clean and green properties are definitely earning a premium. And it can be seen more broadly in the investor space, when recent polls show that investors are saying, look, almost by more than 80%, year over year, this year they are more concerned and want to see resilient properties, resilient investment assets. That’s where the dollars are going to go.

• There has never been a more opportune time to make operations sustainable:

Such a coming together of forces has never been seen in the past. On the one hand, there is the government with carrots and sticks – regulating, mandating that buildings are upgraded, that there is a decrease in energy use and that everyone moves into renewable energy – but then providing financial resources to get that job done, too.

That's combined with what investors are saying. They're saying, look, they want to know that the long-term asset value here is being preserved. And so, they're adding an insistence into the equation. And if putting all of that together, there's never been a better, more opportune time to not only achieve progress against a problem like climate change, but to avail the funds that are out there and drive the bottom line.

• ESG is here to stay, because it’s just good business:

Everybody's paying attention to this issue and they're going to get their opinion in. But here's why sustainability sticks and stays now. It's no longer a thing of charity. It's no longer a nice to have.

The reason is its driving business fundamentals. When being smart about sustainability, organizations are rolling up their sleeves and saying, where is the waste happening in this business? Because every dollar needs to go to growing the business and not spent on wasteful energy.

And when talking about shareholders, sustainability has matured beyond the political pendulum

For example, when enterprises are competing out there for the best talent, they show that they are purpose-led organizations. 70% of young people are saying that's going to be the determining factor for them, as to where they go. And when talking about shareholders, sustainability has matured beyond the political pendulum. It's real business. It’s in the boardroom because it's proven its financial value to that enterprise already.

So, the game has changed, the nature of this being not just on the periphery and nice, but really business-centric.

• Why net zero building technology is preserving long-term asset value:

The whole business won’t be reinvented for something that feels like a fad. So again, when there are these multiple factors coming to play, organizations have got their constituents in terms of the communities, and where they work, demanding that they see responsible behavior.

When talking about energy prices, people in Europe are especially aware about how energy prices are robbing growth dollars. Everyone wants to get on that and turn that around. And when seeing Mother Nature shaking her fist, enterprises want to make sure their assets are resilient against that disruptive environment.

Importance of reporting climate information

The coming of regulations in this space is taking these issues from the basement to the boardroom, when there are financial regulators demanding that organizations and entities report their climate information just like their financial information.

Again, that's going to drive both consistency and clarity, and it's going to accelerate action in this space.