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Green Revolving Loan Funds Finance Energy Projects

April 1, 2014 | 0 comments

Lack of capital dollars can prevent some organizations from investing in green building and energy conservation measures. A few universities and nonprofits around the country have found a way around this problem, however – and even for-profit corporations can learn a thing or two by understanding what they do.

To create a sustainable funding cycle, universities and nonprofits are starting to use green revolving loan funds to help facilities professionals move forward with projects that may reduce operating costs and reduce environmental impact. Green revolving loan funds are internal funds that provide financing for sustainability projects intended to provide cost savings through energy-efficiency improvements, renewable energy investments, green building practices, or water-efficiency projects. These savings are then put back into the green fund to be used for the next sustainability project. As the green revolving fund matures, it becomes a source of capital for green projects and initiatives. According to the Billion Dollar Green Challenge, these types of funds see an annual median ROI of 28%.

Rather than cost savings going back into the overall operating budget, a green revolving fund lets you track exact savings from a specific energy-efficiency or water-saving project. When those savings add up to fund another project, you have solid proof that the organization’s sustainability measures are offering impactful, measurable ROI. You can also control what those funds are used for, whether it’s a solar power project, new LED lighting, building envelope upgrades, or a water-efficient irrigation system.

Green revolving loan funds can be seeded in a variety of ways: through government programs, utility rebates, savings from projects financed via other means, or directly from the capital budget. Some universities have even called on donors and alumni for donations to seed the green fund.

As your organization establishes a green revolving fund, it can be customized to work based on certain requirements. You can establish who within your organization manages the fund (facility/energy managers, administrators, sustainability directors, the finance department, etc.), project criteria to be followed when using the funds, etc.

For example, Iowa State University’s seed funding was established through administrative funds from the president; the university’s sustainability director provides fund oversight. Projects completed with green revolving funds must provide a five-year payback, and fund repayments are based on estimated savings (savings are also confirmed through measurement and verification).

Meanwhile, Agnes Scott College’s seed funding was established through a mix of alumni donations and utility savings. The fund is managed by a Sustainability Steering Committee, and the team is flexible regarding the payback time periods associated with funded projects.

At Dartmouth College, 10% of the savings from green revolving fund projects are placed into a Green Community Fund. Students, staff, and faculty apply to use money from this fund for campus sustainability projects – regardless of whether they provide a financial payback or not.

Would you consider implementing a green revolving fund at your organization – even if you’re a for-profit? Why or why not?

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