The Association for the Advancement of Sustainability (AASHE) in Higher Education has “sussed out” an opportunity for North American colleges and universities to build their own green treasury chests and investment portfolios—which will be devoted to developing renewable power and reducing carbon emissions on-campus.
Facing burdensome budget cuts and unstable energy costs, many colleges are grappling with how to finance urgently needed, but capital-intensive, energy efficiency retrofits. This week, at its annual meeting in Pittsburgh, which drew 2,500 attendees, AASHE launched The Billion Dollar Green Challenge—which encourages colleges, universities, and other nonprofit institutions to invest a combined total of $1 billion, within two years, in self-managed green revolving funds that finance energy efficiency improvements.
“The Billion Dollar Green Challenge asks our higher education systems to invest in green revolving funds to support the campus sustainability movement. AASHE supports the challenge in that these funds will help institutions become more sustainable and will help the higher education community understand the commitment they are making to a just and sustainable future” said the association’s Executive Director, Paul Rowland.
With a slogan, “Save Energy, Grow Money,” the challenge already has a Founding Circle of 32 institutions in 18 U.S. states and British Columbia—among them, Harvard, Stanford, Arizona State, Caltech, Dartmouth, George Washington, Middlebury, the University of British Columbia, and Weber State University. Together, they committed $65 million to the initiative before the launch.
The Challenge is inspired by the exceptional performance of existing green revolving funds (GRFs), which have a median annual return on investment of 32 percent, as documented by Greening the Bottom Line, a report published in February by the Sustainable Endowments Institute, a Cambridge, Massachusetts-based nonprofit organization that produces the GreenReportCard.org website and the College Sustainability Report Card.
GRFs invest money in projects that improve efficiency and decrease resource use, thereby reducing both operating expenses and greenhouse gas emissions. The cost savings that result from efficiency projects are used to replenish the GRF—enabling it to return to its original size, or to grow. After the initial project costs have been returned to the fund, additional savings accrue to the school or department operating budget.
The Billion Dollar Green Challenge defines GRFs using two criteria:
- The fund must finance measures to reduce use of resources such as energy and water, or to reduce carbon emissions (e.g., by developing renewable power); and
- The fund must revolve–that is, savings attributed to the reduced operating costs from funded projects must be used to repay the up-front project costs to the GRF.
“We’re transforming energy efficiency upgrades from perceived expenses to high-return investment opportunities,” said Mark Orlowski, executive director of the Sustainable Endowments Institute, which is coordinating The Challenge along with 15 partners: American College and University Presidents’ Climate Commitment (ACUPCC), Association for the Advancement of Sustainability in Higher Education (AASHE), Clean Air-Cool Planet, Clinton Climate Initiative, Earth Day Network, National Wildlife Federation Campus Ecology, Net Impact National Association of Environmental Law Societies, New England Board of Higher Education, Rocky Mountain Institute, Second Nature, United Negro College Fund (UNCF) Building Green Initiative, U.S. Environmental Protection Agency’s Green Power Partnership, and Vermont Energy Investment Corporation.
There are a variety of ways that schools can procure seed funding to establish a GRF. Funding sources may be used alone, in conjunction with other sources, or in a “matching” context to help solicit donations and leverage other sources of funding.
- Administrative budget: Allocations from central administrative or departmental budgets (e.g. Facilities, Dining or, in some cases, the Sustainability Office) are the most popular method of securing seed money.
- Student body: Student green fees or allocations from student governments can provide seed funding. Students may then be involved in the formation and operation of the GRF, or may simply be the initiators of a campaign to raise capital for the fund. Funds that secure seed money from student sources rarely exceed $100,000.
- Endowment: An institution may allocate a small portion of its endowment to be invested in efficiency projects. The endowment may also provide a loan to begin a GRF, which can then become independent of the endowment upon repayment of loan principal and interest.
- Utility rebates: For projects that curtail demand, utility companies can provide rebates, which then can be leveraged to begin green revolving funds. Since GRFs are able to generate cost savings, they can trigger further rebates or partnerships with a utility.
- Donations: Individuals, alumni, or foundations can donate seed money to begin GRFs. Such donations can be solicited through applications for grants and charitable donations, or through alumni gift campaigns.
The Founding Circle includes members that already have successfully established GRFs. For example, at Harvard, the $12 million Green Campus Loan Fund, first established in the 1990s, grants loans of up to $500,000 for energy conservation projects to each of the university’s schools. With seed capital of $1.5 million from the President’s Office, the growing fund’s low-interest loans have successfully financed projects that reduced the university’s expenses for electricity, natural gas, water, and waste disposal; along with cutting other operating costs. The fund has achieved average annual returns of 30 percent, saved the university $4.8 million dollars annually, and reduced Harvard’s environmental footprint.
“Harvard is at the forefront to show that energy conservation should be funded,” said Heather A. Henriksen, director of Harvard’s Office for Sustainability, which manages the funds.
And the $3 million Live Green Revolving Loan Fund (LGRLF) at Iowa State University (ISU) was created in 2008. The LGRLF is unique in its decentralized implementation structure, which allows each department and building to reap the benefits of its own efficiency measures and gives individual departments the incentive to propose resource-saving projects. ISU’s fund has provided capital for more than 11 unique projects throughout campus, focusing on areas such as waste diversion, energy conservation, and efficiency.
In order to fully participate in The Challenge and gain access to the Green Revolving Investment Tracking System (GRITS), an institution will pay an annual 1/20th of one percent administrative fee (not to exceed $2,500), based on the current size of its green revolving fund. For example, a $1 million green revolving fund would pay a $500 administrative fee, while a $3,000,000 fund would pay a $1,500 administrative fee.
Cheryl Kaften is an accomplished communicator who has written for consumer and corporate audiences. She has worked extensively for MasterCard (News - Alert) Worldwide, Philip Morris USA (Altria), and KPMG, and has consulted for Estee Lauder and the Philadelphia Inquirer Newspapers. To read more of her articles, please visit her columnist page.Edited by
Jennifer Russell
