September 02, 2025
The ROI of Sustainability: A CFO's Perspective
Season 5 Episode 6: There does not have to be a tradeoff between sustainability strategy and a strong bottom line.
The intersection of finance and sustainability is dynamic and full of opportunity. Far from existing in separate lanes, the two are increasingly intertwined, working together to fuel growth, spark innovation and create lasting value.
Economic sustainability and environmental sustainability
At its core, sustainability isn’t a trade-off against profitability; it’s a powerful driver of it. With the right investments, businesses can strengthen their bottom line while delivering benefits that extend to shareholders, society and the planet.
In this episode, we speak to Chris Kuehn, Chief Financial Officer at Trane Technologies, and Erin Garrity, Services Account Manager, Trane.
We take a deep dive into sustainability from the perspective of a CFO. Chris talks about the powerful venn diagram of sustainability, finance and technology; the secret sauce for company growth and how to pitch big ideas to a CFO.
Watch Season 5 Episode 6: The ROI of Sustainability: A CFO's Perspective
There's a notion that sustainability is expensive, that it costs more. Some may even say that it doesn't pay off fast enough, but today's guest has a very different take on that topic. He says, when it comes to the choice between building a sustainability strategy and a strong bottom line, there are no trade-offs.
- That's the art of the possible. That's the, let's take some constraints off and let's talk about what we could do. If the investment dollars were almost unlimited, what could you drive in the organization?
- Here's the thing. It turns out that rather than being a barrier to growth, sustainable investments can unlock new waves of innovation. And when they're done right, everyone benefits, business shareholders, society, and the planet.
- You're listening to Healthy Spaces, the podcast where experts and disruptors explore how climate, technology, and innovation are transforming the spaces where we live, work, learn, and play. I'm Scott Tew, Global Lead of Sustainability Strategy at Trane Technologies.
- And I'm Dominique Silva, Marketing Leader here at Trane Technologies. And on season five of Healthy Spaces, we're bringing you a fresh batch of uplifting stories featuring inspiring people who are overcoming challenges to drive positive change across multiple industries. We'll explore how technology and AI can drive business growth and help the planet breathe just a little bit easier.
- Dominique, it's great to be back with you again.
- You too, Scott. And what have you got in store for us today?
- Today we're following the money.
- Okay. - We're talking about sustainability from the point of view of A CFO.
- All right, that sounds interesting. Everybody loves talking about money, but what I wanna know is how do companies actually assess sustainability investments, right? What are they looking for in such an investment? So to put it basically, Scott, I'm hoping that today you're gonna help me figure out how I can pitch my big idea to A CFO. Can you do that?
- Well, we're actually going to cover that in today's interview. Our guest is Chris Kuehn, the Chief Financial Officer at Trane Technologies.
- All right, I'm sold.
- So Chris began his career at PricewaterhouseCoopers, where he spent 12 years as a Senior Manager. He then held several leadership positions in the HVAC space and joined Ingersoll Rand in 2015. Chris was named CFO of Trane Technologies when the company was launched in 2020. And he made sure that right from the start that finance and sustainability were linked hand in hand.
- Look, I think sustainability can take multiple forms, and I'll start with people. We're right in the season within the company around talking about organizational leadership reviews. We're talking about succession planning, and that is a part of sustainability for an organization. Thinking about how we give people great roles, how we think about retention, and ultimately putting them in positions where they can achieve and be their best. I think about it in terms of our sustainability goals this year, every one of our employees has to have a sustainability goals as one of their 20, 25 performance goals,
- Right?
- And so we've just made that embedded as part of the culture of the company. But from a CFO view, I think part of it really comes down to the, the tangible assets and making sure you're extracting the value from the tangible assets you have in the company.
- Tangible typically means Chris, things people can measure, right?
- Well, things you can touch, things you can measure, touch and measure. And, and I always go back to the day that we made the investment where we put capital to work and we had a business plan and we had expectations of growth or cost avoidance. And then let's make sure we're measuring ourself against that to really come back with a return on invested capital, the ROI of a decision,
- Right?
- I think that's the most important part of a CFO's job, is to think about how do you allocate that capital so that shareholders know that you're putting it to its best use for the shareholder base.
- So I love this that you mentioned tangible things, tangible assets or things we can touch, things we can measure. I mean, there are some people I think that maybe outside of the company that think of sustainability as the intangibles. You know, it's the things that help a company maybe build reputation. It's the things that we make commitments to that seem far off in the distance. But you've already raised this issue of the tangibles things we can measure investments that we do make to improve operations. Right? But what about the intangibles? Does a finance leader care about those as well?
- Well, yeah. This is, this is actually where I think our teams, your sustainability team and the finance team, right? And I'm fortunate enough to have responsibility for our cybersecurity team and our information technology team as well. I think this is where our teams of, I think of like a Venn diagram. We've always had some level of overlap,
- Right.
- But if I look at the last five to six years, that overlap has only gotten stronger.
- Yeah, agreed.
- And I think it balances both the intangibles and the tangible. So I think about our sustainability report and we've, your team has done such a great job making that a hallmark of the company. And, and now over time we've expanded to it. I don't think it ever gets shorter.
- No. - Each, every year it always seems to get more because we have more to share. Okay, that's fair. But over time, we've added controls around some of the key measures that we report. But as you know really well, 'cause you spend a lot of time with investors, the investor questions around sustainability. What is our company doing internally? What's our company doing for customers? Those questions have only gotten stronger and deeper and more voluminous over the last five years. And our collaboration is really, this Venn diagram with the overlap is very, very strong right now between our teams,
- There's a lot of stakeholders, right? And you live in a world of, you know, high stakes expectations in terms of Wall Street and analysts who are analyzing the company and its performance. Most of our listeners would probably think of Wall Street as a very fickle group, happy one day, not so happy the next, I mean, how does someone in your world think through helping those stakeholders understand the value behind sustainable performance?
- Yeah. Well, I think it's a quarterly report card that our entire company gets, and we like focusing on the long term. But there is the practical reality of each and every quarter. You've got the report card. I think the confidence that the company's been able to demonstrate top line revenue growth, well above market growth, is the number one question we get, which is tell us how you do it and, and what's the recipe? What's the secret sauce? And we can certainly get into a lot of the reasons behind that because it really plays to the CFO's role to make sure you're making those investments that not only generate, okay, it could be cost today, but it's really gonna drive market outgrowth tomorrow. And keep seeding that so that you continuously or sustainably have that top quartile revenue growth. So after they ask the question, what's the secret sauce? The next question naturally is how long and how far into the future can you sustain that? And okay, we try to be careful around that because we, we don't wanna go too far in advance into the future, but I think each of our business units have great opportunities for growth. And what we've, what we've seen the last four years with the 12% reported revenue growth cagr, it just tells you that the, the game is not over. We haven't gotten to the end of the game. We really think, if I use a baseball analogy for our listeners out there, we're really in the first inning here of decarbonizing all this space. And now how do you make that sustainable over time? And it's sustainable for customers, it's sustainable for Trane Technologies.
- Hey Chris, you mentioned something about quarter to quarter and I mentioned that I think people sometimes think of Wall Street as very fickle: Lve you today, not so much tomorrow. Does your thinking on this subject, does it hold for when markets are down?
- Yeah, I think that you can outperform in down markets and I'll use our transport refrigeration business in the Americas as an example. You know, this is a business that has its cycles and typically when there's a down cycle, it could be 18 months in length. We happen to be in year four of an 18 month down cycle. But you can look at it as well, do I pull back on investments? There's a concept that we've been talking to investors about, which is an innovation flywheel and the investments that go in an innovation drive the market outgrowth. And we have been able to prove even in down markets that we're outperforming those down markets. And it's really driven to innovation. And you have to make sure that that continues into the future, the sustainable part of that. And that's why making and continuing those investments today, don't be episodic with the investments. Can you pivot where you want the investments to be because you're constrained? Absolutely. But at the same time, you can't cut off that new product development, that innovation flywheel, because in our example, transport markets, they're gonna come back. And I don't think we want to be going to customers with the same products we sold three, four years ago and say, here they're ready again, you want compelling new solutions. And that's why we're investing in electrification. We're investing in hybrid fuel technologies to give customers optionality and those markets will grow again. And we'll be ready for that. But I think about that throughout our portfolio.
- Is that part of the secret sauce on growth? Because I, I do wanna talk to you about growth and get your thoughts on where are we seeing growth and what do you think's behind that?
- I think it's part of the secret sauce, Scott. I really do. But once you get that flywheel going and you start driving that innovation, you don't wanna be episodic with it. And so we get a lot of questions around, is this something you would slow down? Is this something you want to advance? And, and Dave and I and the, the enterprise leadership team look at it as how do we keep advancing that. There's always room to accelerate investments into the year to drive earlier paybacks. That gives us the confidence internally to keep making those investments. 'cause we can see the market outgrowth. And right now investors are really valuing top line revenue growth. It should fall to the bottom line. Okay. Parts of it. And we like to reserve some of that profit that falls to the bottom line to invest back in the business. But if you can demonstrate that top line revenue growth, I really think you get there when you have an innovative product and you can sell that to customers.
- When you think of growth, you're obviously thinking about sustained growth. So what are you, what are you excited about? What areas?
- Well, I'm a little biased because we have, part of our business operating system in the company is to perform at a minimum twice a year innovation reviews. And we just finished those at the end of the second quarter. We're taping this in early August, so they're very much fresh on my mind. We do long range plans in the company. So I get some really strong insights as to where our bets are for the next three plus years. All of our businesses have great opportunities for growth. I walked away with, okay, the pipeline on the innovation is only getting bigger, and how do we find more ways to fund the pipeline to make it go faster? So the, the business that gets the most attention around the top line revenue growth is gonna be commercial HVAC. So
- That's the heating and air that goes into office buildings, at schools, universities, hospitals, that type of thing,
- Right? A non-residential application, and we have a great residential business, okay, and we have a great transport refrigeration business, but what we've seen, the growth in the last four to five years has really been in commercial HVAC and an estimated trillion square feet that needs to be decarbonized. Much of that is commercial space. And we're probably still in only the first inning of a baseball game here to ultimately decarbonize that space. And while data centers gets a lot of attention today, and it should, there's a lot of growth in that space. And we believe we're winning more than our fair share in the data center vertical. What's as important to us is to make sure we're investing in the product lines for all of the verticals.
- Mm. So we're not placing all of our chips on data centers.
- We're not, and we're thinking about that from a capacity perspective too. We, in theory, you could try to fill up the entire capacity with, with projects in one vertical, but that's where we stay ahead of making those capacity investments. Because, you know, we've been talking for about about four or five years now, the office vertical being down post COVID vacancy rates remain very high. But you know, there are pockets of opportunities in the office vertical as an example, moving from Class B to class A office space that landlords and, and supervisors, they want to have that ability to attract tenants. So let's make investments to do that. That's what our direct sales force does a phenomenal job with. And it's not just knowing our product super well, but they have the local experience. They know the buildings in each of these cities, they know what's inside the buildings, they know the last time it's been upgraded and they know the local incentives that ultimately we can pass on to our customers to make sure that the ROI is something we can lead with. And I'm sure we'll get into to this conversation, but, but paybacks are so important when you're, when you're the CFO and you've got 10 options in front of you. And how do you decide which one to make
- Well that's my next questions That's next question I wanted to ask about that. I think we have a lot of listeners who are wondering, I mean, I go to a lot of external events, I talk to a lot of peers of mine. A lot of companies have different way, many companies have different ways of evaluating investments in capital or investments in their own facilities. And I probably every CFO has a different litmus test about how you should evaluate one project over another. Talk about your perspective on how that's done from your, from your side of the tracks.
- We've actually break down our investments into, into a few different categories. Okay? There, there's a regulatory category, things we have to do, which things you have to do. And, and I think good example there would be the recent transition, the refrigerant transition in the US to a lower GWP refrigerant and the investments we made, not only for the product readiness, but also the, the factories to be ready to handle that refrigerant. Then I think we, we've got another category that we would call the sustaining category. And so you may have existing pieces of equipment that need certainly maintenance, but at some point in time they need to be upgraded and let's make a sustaining investment into the business. But the majority of where we measure our investments, and I look at this from a percentage basis and a dollar basis, is really growth that, that's the third category. And it could be growth, certainly top line growth, it should be market share growth as well. It could also be, there's a couple of bets on some high flyers where we don't know if that's where the market's gonna go. But if it does, we'll see outsized growth in that space. And that could be product, it could be channel, it could be people, certainly a lot around the product side, around the new product development side. It could be digital, right? More and more of our HVAC and transport world is becoming digital and digital connectedness. So what do we make investments there to support customers? A lot of our business is making sure that the products that have been installed are operating the way that they should, which comes back to the ROI conversation of let's not lose any dollars on the table that we should get in returns, but we wanna make sure that our investments are driving the majority into that growth category for the company.
- For Chris, sustainable investments need to do two things, deliver ROI and drive company growth. And that's top of mind for all businesses. Our direct sales force knows their cities, knows the buildings and local incentives and that combination means that they can lead with ROI. But it's more than just knowing products and solutions. Sustainability is part of our culture. It gives our employees pride in what they do and they pass that on to the customer.
- Hello everyone, my name is Erin Garrity and I'm a Services Account Manager for Trane Commercial based out of New York City. One of the areas that I realized I can have a tremendous impact on my customers is through our remote services that are offered through our connected buildings services agreements. So take for instance, this heat wave that we're in the middle of in New York City, right? If a client is having an emergency or a failure and we are remotely through either Tracer SC Plus or Tracer Ensemble, our team can log in completely remotely within minutes of receiving this call and begin diagnostic efforts before ever having to roll a truck. And oftentimes we can make adjustments and resolve the issue without ever needing to be on site. Which helps our customers stay comfortable, it helps their systems stay up and running and it helps everybody have a much more pleasant day on these very warm days in this heat wave. I would say along that same thread, a technology that I believe can completely revolutionize the world is the continuous, the continuation of the digitization of all things building systems, right? If you have connected systems with data that you can track and manage and work on, then you can now measure your goals and make them that much more achievable. So I would say the continued digitization of the built space is something that I'm looking forward to completely revolutionizing the built environment.
- So at this point, we understand what the life of a CFO in a sustainable organization looks like, and we've heard about how they choose investments, but great investments require innovative ideas. So now we're going to get actionable.
- Chris, I think probably there are people listening to this who are wondering, is there a recipe for pitching an innovation or a sustainability related project to A CFO or to an investment review board? And so now that I have you here on the spot, I'm sure listeners have leaned forward wondering what the answer to this is. So what's your advice to those who may be listening saying, is there a secret to pitching the right innovation project the right way?
- I don't know if there's any one secret, but here are some of the things that have worked over time. Okay, the bigger the dollar the investment, the more pre-meetings you're gonna probably wanna have, right? So, but, but if I think about long range plans, which we do at a minimum once a year and we recycle 'em, those larger projects that are being considered, you know, maybe 80 or 90% of them happen, but by the time we're having the conversation to make the approval, we've probably talked about it, Scott, for, and you know this, but we've probably talked about it at least three or four times in the company.
- That's right.
- It could have been on two prior long range plans. It could have been an operating plan review, it could have been in one of our
- This is not how creative your slide is, right? It's just not just about that, right?
- It it's not. And and by the time you get to the slide, like people should already understand the operational need.
- Yep. - And what, what part of the growth trajectory for the company and the growth strategy for the company is it supporting? And we've got strategies for each of our units and it's something we regularly review with our business units, our regions, and ultimately with Dave, our CEO. But you link it back to that strategy and how it fits into the strategy house, then okay, now it puts it into a frame of reference of, okay, we're really trying to drive this growth and this is integral to that. Okay, now I know this the context of what you want to ask me for. And then honestly, I mean I do look at the absolute value of the dollars. I'm trying to think, here comes the numbers about the numbers.
- Know your numbers,
- Know the numbers, but then the next thing I'm looking at is the payback, right? I wanna understand, obviously the assumptions that go into the payback is there's generally revenue assumptions and margin assumptions, but what does that payback look like? What's the speed to deliver? Do we have the internal resources capable to deliver on the project? All standard kind of questions, but we try to turn it around a little bit, Scott, we don't always try to ask the question, how can you do it for less? We actually ask the question, what if you had more? Could you go faster? Could this be a better business case? And we just try to turn it a little bit on its head to say, if you had more investment dollars, would it change the outcome? I think people in general are, when it's a bigger number, they're probably leaning towards, I need to go with the smaller ask. I don't know if I want to go for the big ask. But especially if we're in a long range plan conversation to me, to Dave, to our leadership team, that's the art of the possible, that's the, let's take some constraints off and let's talk about what we could do if the investment dollars were almost unlimited, what could you drive in the organization? Okay, let's bring it back to reality when we're asking for the actual dollars,
- Right?
- But by then, we've heard it a few different times.
- Yeah. - And we're getting excited about the opportunity. And now the question is how do you go faster?
- I think, I think the, I think what you just said, those steps are, I think they'll be very helpful for a lot of people. So,
- And I like dark chocolate too, Scott.
- Oh - Yeah. Right. There's, if you wanna bring some snacks to the conversation, you know, let's be clear. I mean there's some minimums that need to be brought to the table here, but I'll tell you, I I, it's actually one of the most fun parts of the job is getting ready for one of those meetings and folks wanna have a chat and they wanna run some things by you in terms of does this make sense? That makes sense. And that's one of the hallmarks of Trane Technologies. These are not businesses competing against each other for dollars. These are businesses working together to optimize the dollars that we spend. And I think about engineering, I think about new product development. It's rare that it's a silo and you know this, it's rare that it's a silo, that a new product development can only benefit one part of our business. When we think about comfort cooling and refrigeration, there's aspects that can really be leveraged across the company. And I think we do a really good job with that.
- I do too, Chris, I began this discussion with me saying I wanted to peek behind the curtain the day in the life of A CFO. And I am thinking now about a lot of your days has spent what I would call seeing around the corner. I mean, I think of sustainability a lot of times is helping a company see around the corner of what's coming in terms of expectations of how we improve. What about your perspective about seeing around the corner? How do you do that?
- I'll tell you the, while we spend a lot of time with investors and they ask a lot of questions of us, we get the opportunity to turn it around to them as well. They get a chance to see a lot of different companies and, and evaluate our growth prospects against others.
- You mean you ask them questions? - We get the chance to, we let them go first to be fair, Scott. But I'll tell you with with with shareholders and our great shareholders that we have, they're always willing to kind of share their insights in terms of what they think success could be. So that's one way to kind of get intelligence from, from a broader market view. I've got a few outside groups that I stay very well connected with. There's actually a really good Charlotte group here of CFOs that get together here at least once a quarter and really bad around ideas in terms of what we're working on.
- Yeah.
- But I think it's so much more outside of the finance function. We have so many things that finance can deliver on or IT or cybersecurity. It really is staying close to the business. So my one-on-ones with our regional presidents in each of the businesses making sure I'm getting out and seeing a few of our site locations each and every year. Where can our finance team get closer to being the business partner? Those are areas that gives me a lot more confidence on looking around corners. But from an investor perspective, they're really wondering how are you gonna spend all the cash that you generate? And, and I would tell you that by all the long range plans that we do and our annual operating plans, the number one place we wanna spend that money is to invest back in the business.
- That's sort of the driver for our long range plan, right?
- It is, it is. I mean it starts with the top line growth and while it's being well regarded today, and it should be for, for, for very, very long time, we gotta make sure that innovation flywheel keeps getting funded and that will be consistent. Okay? It's been a hallmark of the company for 15 years and we keep adding to it. We're gonna keep doing it. It creates that DNA in the company and the culture in the company where we want to keep innovating, but let's keep investing back in the business and good things will happen. And then we have other ways to benefit shareholders as well with the cash. But to me that gives great optionality to our employees. They're part of a growth company, which means new opportunities for roles and exciting things to work on. I know your team and my team, we spent a lot of time together and how do we explain our roadmap to investors, to our shareholders around what we're doing inside the company and outside the company and, and we get a lot of compelling interest in that dialogue.
- Well I think it means something to our employees, Chris. I think the culture here, you probably would agree, is it's pretty unique in terms of, but I think it's because of those things are always in front of us. This innovation to grow as well as to do it the right way sustainably.
- I think we are in the business of going to our customers and showing them what is possible with the existing systems they have or if you wanna do further upgrades or swap out, we have that capability too. But there's a lot we can do with your existing systems,
- Right?
- With great ROIs. Right? Great paybacks. And for any CFO listening to this conversation, if you've got building assets in your portfolio and we know if you, over 30% of energy is wasted after the meter.
- That's right.
- We're gonna spend a lot of time around demand side management. How do you optimize your existing applications and systems and assets to reduce that waste? To me, as a CFO, you're looking for those opportunities for waste and I'd rather go after those costs and have more painful conversations, right? Let's go after those costs. We're seeing waste today. And then you can take those dollars and decide how you want to balance it. Do I wanna put that to the bottom line or does that help fuel the innovation flywheel that I'm trying to drive in other parts of the business? To me it's an absolute home run.
- I love how you kept the ROI of sustainability from beginning to end of this conversation. So thank you for that.
- Yeah. I think it's, it's part of the culture of of being the CFO and we've been able to keep showing demonstrated returns for our own shareholders. But the fun part is working with a customer on a multi-year journey and we get a lot of insight to that with our teams, you know, across the US and the globe. But it's rarely a one and done application, right? It's generally a multi-year journey.
- It becomes a relationship.
- It becomes a relationship. Yeah. We want that customer for life. We think about our applied solutions, very complex solutions that require a lot of service and maintenance over that period of time and upgrades. But they're such compelling returns. I know you had Jose La Loggia on a recent episode, right? And you know, three years or less paybacks and I think as any CFO, those are very compelling numbers to go look at to say, okay, why don't we go after and get those savings.
- I've gotta tell you, Dominique, I thought this conversation was really insightful.
- Yeah, me too. And it was so refreshing to hear A CFO speak so openly and candidly about how a company makes sustainable investments to drive growth. That was cool.
- Yeah. What I felt most insightful really was Chris's genuine view that you get the right people in the room and they'll make the right decision. Whether it's finance leaders or sustainability leaders or business leaders.
- Yep. And while you were talking, I was taking notes, so I'm gonna be using all of Chris's pointers to write the pitch.
- Oh yeah.
- For my next big idea, Scott. It's gonna be big. And actually on that note, I'd like to hear from our listeners, so what parts do sustainable investments play at your company right now? And how do you think that focus will change in the future? Got a thought, leave us a comment. We'd love to know.
- And that's it for this time. This has been The Healthy Spaces podcast with me, Scott Tew and my co-host Dominique Silva. To learn more, check the links in the show notes. Wanna stay on the front line of innovation and sustainable growth? Subscribe to the Temp Check newsletter on LinkedIn to stay in the loop. We are back in two weeks, so be sure to lie and subscribe so you don't miss out. And thanks for joining. We'll see you next time.
Featured in this Episode:
Hosts:
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Marketing Leader EMEA, Trane Technologies
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Global Head and VP, Sustainability Strategy, Trane Technologies
Guests:
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Executive Vice President and Chief Financial Officer, Trane Technologies
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Erin Garrity
Services Account Manager, Trane
About Healthy Spaces
Healthy Spaces is a podcast by Trane Technologies where experts and disruptors explore how climate technology and innovation are transforming the spaces where we live, work, learn and play.
This season, hosts Dominique Silva and Scott Tew bring a fresh batch of uplifting stories, featuring inspiring people who are overcoming challenges to drive positive change across multiple industries. We’ll discover how technology and AI can drive business growth, and help the planet breathe a little bit easier.
Listen and subscribe to Healthy Spaces on your favorite podcast platforms.
How are you making an impact? What sustainable innovation do you think will change the world?
Forward-Looking Statements
This episode contains “forward-looking statements” within the meaning of U.S. securities laws, which are statements that are not historical facts, including statements that relate to our investment strategy, our capital allocation strategy, our outlook on the markets in which we operate, innovations to our products and services, our sustainability initiatives and the anticipated impact of these initiatives. These forward-looking statements are based on our current expectations and are subject to risks and uncertainties, which may cause actual results to differ materially from our current expectations. Factors that could cause such differences can be found in our Form 10-K for the year ended December 31, 2024, as well as our subsequent reports on Form 10-Q and other SEC filings. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect the Company. We assume no obligation to update these forward-looking statements.
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