Energy Efficiency Is Now a Business Imperative

In a world of rising energy costs and growing ESG demands, operational efficiency is no longer a nice-to-have – it’s a strategic imperative. Asset owners are increasingly under pressure to reduce carbon emissions, meet regulatory benchmarks like Singapore’s Green Mark certification and MEI mandate, and improve building performance without blowing up capital budgets.

This is where Energy Services Companies – or ESCOs – come in. By offering performance-based solutions that tie savings to delivery, ESCOs can help landlords decarbonise ageing buildings, reduce OPEX, and future-proof asset value, all without upfront investment.

Breaking It Down: What Is an ESCO and How Does It Work?

ESCOs deliver energy efficiency upgrades through a model known as an Energy Performance Contract (EPC). This approach guarantees results by tying contractor payment to measurable improvements.

There are two common types of EPCs:

• Guaranteed Savings Model: The building owner funds the improvements, and the ESCO guarantees a minimum savings level. If shortfalls occur, the ESCO covers the gap.
• Shared Savings Model: The ESCO funds the upgrades and is paid a share of the verified savings over time. This allows building owners to improve energy efficiency with zero upfront capital.

In both models, the ESCO assumes technical and performance risk – giving owners peace of mind and predictable returns.

When Should You Consider an ESCO?

Not every building needs a performance contract – but for many commercial owners, it’s the fastest, least risky way to achieve energy and cost goals. ESCOs are particularly valuable in these scenarios:

1. You manage ageing commercial buildings with rising OPEX

Older buildings often suffer from outdated equipment, inefficient lighting or HVAC, and unoptimised building management systems (BMS). Left unaddressed, this leads to rising energy bills, more frequent repairs, and tenant dissatisfaction.

2. You need to comply with environmental mandates (Green Mark, MEI, and beyond)

In Singapore, Green Mark certification and minimum energy efficiency standards are becoming stricter, with a 2030 timeline for many commercial assets. ESCOs can identify cost-effective ways to meet – and exceed – these targets while ensuring sustained performance, not just a one-time tick-box.

3. You want to improve asset value or secure green financing

Sustainability-linked loans, REIT ESG benchmarks, and investor expectations are reshaping real estate capital markets. Buildings that can demonstrate consistent operational efficiency, not just compliance, enjoy better access to capital and future asset premiums.

What a Typical ESCO Journey Looks Like

A credible ESCO will walk you through a structured process that includes design, execution, and post-project verification:

1. Energy Audit & Baseline Analysis: A technical audit is conducted to understand energy usage, identify inefficiencies, and set a performance baseline.

2. ROI-Driven Planning: The ESCO recommends measures based on cost–benefit analysis, from lighting retrofits to chiller plant optimisation, and calculates potential savings, payback period, and financing options.

3. Implementation & System Integration: The ESCO manages procurement and project rollout. This often includes automation upgrades, BMS integration, and sensors to track usage and performance.

4. Measurement & Verification (M&V): Post-implementation, energy savings are measured and verified based on international protocols. This ensures transparency and performance accountability throughout the contract period. 

Typical energy savings for commercial buildings range between 10% and 30%, depending on existing conditions.

Why This Matters Now 

The push for energy efficiency is no longer a niche interest; it's a core component of successful asset management.

Green regulation is tightening: Frameworks like Singapore’s Green Mark 2021 are increasingly tied to verifiable, ongoing performance, not just design-stage plans.

ESG reporting requires verifiable metrics: Investors and stakeholders are demanding transparent, data-backed reporting on environmental, social, and governance (ESG) criteria. ESCO projects provide the exact energy and emissions metrics needed.

Tenant and investor expectations are shifting: Premium tenants and institutional investors now expect energy transparency and sustainability credentials as standard. A green-certified, efficient building is a more competitive asset.

Choosing the Right ESCO Partner 

Not all ESCOs are created equal. When selecting a partner, asset owners should look beyond equipment and installation. Here’s what to look for: 

Your asset is over 10 years old, and its core M&E systems (chillers, air handlers) have not been significantly upgraded.

• Strong M&V Frameworks: Ensure that the ESCO follows internationally recognised measurement protocols for verified outcomes.
• Track Record in Real Estate: Your partner should understand the unique operational and compliance needs of commercial buildings — not just energy systems in isolation. 
• Tech Stack & Automation Capability: Leading ESCOs integrate smart building tech, from IoT sensors to digital twins, enabling predictive maintenance and long-term optimisation. 
• Accreditations: In Singapore, BCA-Registered ESCOs are qualified to execute Green Mark Super Low Energy (SLE) and MEI-compliant projects. 

Your 5-Point Readiness Checklist

Before engaging an ESCO, ask yourself:

1. Is my building’s energy use high compared to peers or historical benchmarks?
2. Do I have ageing equipment or controls that are no longer fit for purpose?
3. Are regulatory deadlines (e.g., MEI) approaching for my property class?
4. Am I planning a major asset enhancement or repositioning?
5. Do I have limited capex but need to deliver ESG or cost-saving results?

If you answered "yes" to two or more, an ESCO engagement may offer the optimal path forward. 

What’s Next for Your Portfolio?

As energy costs rise and regulatory scrutiny deepens, performance-based upgrades are becoming a business imperative. The ESCO model offers a practical way for asset owners to meet today’s energy targets while preserving long-term flexibility and value. 

Savills Singapore is among the BCA- and NEA-Registered ESCOs qualified to support commercial buildings in achieving Green Mark and MEI compliance, with experience spanning energy audits, performance contracting, and systems optimisation.

To explore how a performance-based energy strategy could work for your asset, contact our Energy & Sustainability Management team.