Green Revolving Funds Making the Grade

College campuses across the US and Canada have caught on to a new way to fund energy-efficiency and sustainability projects: green revolving funds (GRFs). What are they exactly? The paper Green Revolving Funds: An Introductory Guide to Implementation & Management (PDF) describes them as a fund established within an organization to finance energy-efficiency projects and other cost-saving initiatives. Savings from these projects are then tracked and used to repay the initial capital contribution from the fund. By doing so, GRFs establish a sustainable funding cycle and improve the long-term operational and financial performance of the infrastructure and organization as a whole.

FIGURE 1: Green revolving fund life cycle
GRFs provide a sustainable funding model through a savings-funded repayment approach.
Graphic showing the life cycle of a green revolving fund: capital, improvement, savings, repayment
The “In” Crowd: Who’s Using GRFs?

With returns on investment often well north of 10 percent and the budgetary flexibility to make changes that can help schools start saving right away, GRFs have gained traction with everyone from facilities managers and faculty members, to administrators and students on 90 campuses, according to the Campus Sustainability Revolving Loan Funds Database maintained by the Association for the Advancement of Sustainability in Higher Education.

How does saving $28,000 annually in energy costs on a single building sound? How about when the initial investment was only $108,000? That’s less than a four-year payback period! Denison University’s recent GRF-funded project, highlighted in the New York Times article Investing in Energy Efficiency Pays Off, realized just these numbers … and they’ve got plenty more projects to come.

Denison and nearly 50 other institutions have joined the Billion Dollar Green Challenge (BDGC). The challenge rallies colleges, universities, and nonprofit organizations to invest a total of $1 billion in GRFs. With its bold vision and practical application potential, the initiative has gained champions, including the US Environmental Protection Agency, Clinton Climate Initiative, Net Impact, and the David Rockefeller Fund.

FIGURE 2: Green revolving funds across the United States and Canada
GRFs have spread to more than 90 colleges and universities in the US and Canada.
Image of a North American map with locator pushpins identifying which North American colleges and universities have GRFs or are BDGC participants
Core GRF Benefits: Financial, Organizational, and Sustainable Boons

The benefits of this approach are numerous. BDGC lists a few ways that GRFs can help institutions, including:

  • Transforming expenses into investments
  • Establishing a mechanism for funding efficiency
  • Streamlining the internal loan process
  • Implementing project performance tracking
  • Instilling sustainability as an organization-wide value
  • Taking advantage of new fundraising opportunities

This simple formula has been the key to unlocking speedy project delivery and generating savings, as well as boosting sustainability cred for colleges that have taken on the GRF model. As students and faculty push for more-sustainable communities and campuses, GRFs can help facilitate investments toward that goal. An April 2015 Huffington Post story, Amid Calls to Divest, Schools Explore Green Revolving Funds, dives into the role GRFs are playing in this push toward campus sustainability at Harvard and other major universities.

How to Get Started: Funding and Guides to Help Along the Way

Sustainability is great, but how are all of these colleges coming up with the funding to kick-start their GRFs? For donors with fatigue from years of funding operational costs, GRFs can be a very appealing capital investment that will keep on giving far beyond the initial project. Some campuses have also instituted opt-in tuition-based funding, among other approaches. Want to make GRF dollars go even further? Pair them with energy-efficiency incentives from your gas or electric utility. Creative solutions to securing initial and partner funding abound.

For other funding approaches, reports on GRF successes, and guidance on how to start your GRF journey, check out the BDGC resource library.

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