A ‘Green Revolving Fund’ provides funds for small projects such as the one described above, projects that will make the college or university more sustainable and, in most cases, pay for itself by reducing expenses for energy.
Any project that reduces energy use is critical because it also reduces greenhouse gas emissions [GHG]. A surprisingly small fund can get things started, but it’s essential to have clear criteria and a simple proposal process and a commitment to prompt funding of projects that meet the criteria. (In addition to the direct benefits, these funds can help attract additional funding and demonstrate a real commitment to sustainability!)
Funds can come from current operating expenses budgets (since they will reduce those expenses), from donations dedicated to the fund, and/or by investing endowment funds in these high-return projects.
Excerpt from ‘Greening the Bottom Line’, a report from the Billion Dollar Green Challenge:
￼Green Revolving Fund Benefits
Boosting Return on Investment (ROI) – Established green revolving funds (GRFs) report a median annual return on investment (ROI) of 28 percent. This suggests that GRFs can significantly outperform average endowment investment returns, while maintaining strong returns over longer periods of time.
Achieving Short Payback Period – Schools reported a median payback period of 3.5 years, which means on average more than a quarter of all money invested in projects can be reinvested within one year (given that savings are typically paid back into the fund on an annual basis).
Initiating New Mindset – GRFs overcome the limitations of budgeting energy efficiency projects as expenses, rather than as a low-risk/high yield financ- ing resources. They are transforming energy efficien- cy upgrades from perceived expenses to high-return investment opportunities.
Facilitating Flexibility – GRFs allow for the use of a variety of capital sources and they can be scaled up over time.
Hedging Against Rising Energy Prices – GRFs are an effective strategy for hedging against rising energy prices without the negative downside of traditional energy price hedges, which incur losses if energy prices stay flat or decline.
Advancing Educational Goals – GRFs foster campus community engagement, creating student leadership opportunities, and developing learning experiences outside of the classroom.
Green Revolving Fund Examples
Reliable ROI – George Washington University’s Green Campus Fund invested $141,000 to upgrade the lighting in their academic center in 2010. Since completion, the project is generating $100,000 per year in savings and has already more than paid for itself. With a projected lifespan of at least 8 years, the original $141,000 investment will generate about $800,000 in total savings (or substantially more if energy prices rise).
Alumni Fundraising Opportunity – Creation of a GRF can be presented to alumni as an innovative giving opportunity that will continue to produce income for the school. For example, Agnes Scott College (Decatur, Georgia) raised about $400,000 within just a few months in order to create their new green revolving fund.
Investing Cash Reserves – Earlier this year the University of Vermont board of trustees approved a $13 million investment into a new UVM green revolving fund using capital from the institution’s cash reserves. Instead of earning 2.5 percent inter- est (as they did last year on their other cash reserves investments), the revolving fund will pay 5 percent interest and help UVM invest in substantial new energy efficiency retrofits. UVM’s new $13 million fund is now the largest at any higher education insti- tution in the country.
With rising fuel costs and budget pressures creating continued incentives for innovation, SEI expects the number of GRFs to grow steadily in the coming years. Also spurring on GRF development is a grow- ing body of resources to promote GRF best practices in higher education and beyond.
One reason for the recent popularity of GRFs is their ability to unite environmental concerns with financial goals, thus appealing to multiple interests from students, faculty and staff to administrators, alumni and trustees. The GRF is successful at both large universities and small colleges alike for its highly adaptable structure that can be targeted to specific institutional priorities and capital availability.
The GRF is versatile and effective, and has reduced energy use, operational expenditures, and the environmental impact of college campuses across North America.
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