The Billion Dollar Green Challenge (The Challenge) encourages universities, cities, schools, healthcare institutions, airports, and other organizations to invest a combined total of one billion dollars in self‐managed green revolving funds (GRFs) that finance energy efficiency improvements. The Challenge was launched in October of 2011.
GRFs invest in energy efficiency projects to reduce energy consumption and reinvest the money saved in future projects. They are called “revolving funds” because the funds loan money to specific projects, which then repay the loan through an internal account transfer from savings achieved in the institution’s utilities budget. Participating institutions will achieve reductions in operating expenses and greenhouse gas emissions, while creating regenerating funds for future projects.
The Challenge seeks to create a vibrant network of institutions and their staff who are working towards implementing cost-saving sustainability projects. Through The Challenge, the Sustainable Endowments Institute and our partners and participating institutions are developing resources to support those working to establish their own GRF.
Two Page Summary
Download a brief summary that explains The Challenge and how to join.
Having a green revolving fund ensures that an institution will always have a source of financing for sustainability projects, thereby building in a system for ongoing savings. For example, if money allocated to further sustainability efforts is spent on a one-time project, there are no additional benefits beyond that one improvement. However, those same funds could instead be used to create a GRF, which then lends the money to the project. This process not only accomplishes the original goal, but also captures the continued fiscal savings and makes them available to lend to new efficiency projects.
Institutions can benefit from establishing green revolving funds and joining The Challenge in many ways:
Benefits of implementing a green revolving fund
- Transform expenses into investments. Despite the massive cost-saving potential of sustainability investments, most institutions still see them only as expenses, or at best as a way to avoid costs. The “revolving” aspect of green revolving funds highlights that energy and other efficiency projects make the institution money over time, and that their upfront costs are in fact investments in the future financial health of the institution.
- Institutionalize a mechanism for funding efficiency. Green revolving funds provide a perpetual funding source, even if budgets tighten and funding becomes more scarce in the future. A dedicated fund, rather than a series of one-off investments, provides a formal and more secure commitment that ensure cost-saving efficiency projects will be funded.
- Streamline the internal loan process. It is often easier for facilities staff to access a dedicated fund for financing projects than to navigate a more complex funding structure each time they want to acquire capital from the college or university.
- Implement performance tracking. A revolving fund helps guide the measuring of cost savings and energy data, which can then be used to benchmark against the performance of peer institutions.
- Instill sustainability as an institutional value. All members of the campus community interact with a green revolving fund, whether through student research, implementing facilities projects, financial tracking, or Board and administration leadership on sustainability. They are also very marketable, and provide tangible evidence that demonstrates a commitment to sustainability in ways that one-time allocations do not.
- Seize new fundraising opportunities. A green revolving fund provides a compelling option for donors to give as it helps relieve operating costs, promotes educational opportunities for students, and is a gift which continues to magnify its impact through each revolution of the fund. In this way, revolving funds combine some of the positive aspects of both endowment and annual operating fund campaigns.
Benefits of joining The Billion Dollar Green Challenge
Consulting throughout the life of the fund
- SEI expertise and knowledge in developing charter documents, fund proposals, and project guidelines.
- Connections to technical advisers at similar institutions for help with building institutional buy-in, starting the design process, and managing the fund.
Project tracking, identification, and organization
The Green Revolving Investment Tracking System (GRITS) is a web-based project management platform used by over 400 institutions to plan, track, and organize sustainability projects, savings data, and GRF finances. With it you can:
- Automatically calculate energy, financial, and carbon savings as well as payback period and ROI for both proposed projects you’re evaluating and for completed projects.
- Enter new projects in minutes and maintain savings and transaction data in one online location, saving time and ensuring data is backed up and organized.
- Allow different stakeholders to collaboratively manage the GRF through multiple user accounts.
- Access the GRITS Library with over 2,500 completed projects for benchmarking and inspiration from other institutions using the platform.
- Create and print customizable graphs based on aggregate and project-level savings data to communicate your GRF’s impact.
Recognition of leadership and positive media attention
- Reputational benefits from being part of a leading group of institutions that publicly commit to energy efficiency.
- Inclusion in continuous outreach by SEI to promote The Challenge and GRFs.
- Individual press releases and assistance with your institution’s communications department to highlight your GRF’s success.
Supporting staff with an engaged network and resources
- Connect with the network of Challenge participants through webinars, the Green Billion newsletter, and expert conference calls.
- Professional peer network and collective knowledge base supports the sharing of best practices, troubleshooting fund management and implementation, and networking and professional development.
Join The Challenge
Download the Info Packet to the right to learn more about The Billion Dollar Green Challenge and access the agreement document to have your institution join.
To join, your institution must pursue one of the two following action plans:
1) Maintain a green revolving fund already in existence, and consider a commitment to expand the fund over time. There is no minimum fund size to join.
As part of this plan, at least 50 percent of money saved through a project investment by the revolving fund will return to the fund to be re-invested in future projects— at least until the full cost of the project has been repaid. To qualify, the existing fund must also be operational and have mechanisms in place to identify projects and make investments.
2) Initiate the process of creating a green revolving fund that will meet the 50 percent payback rate requirement mentioned above. Our progress will be tracked according to four quarterly benchmarks within the indicated time periods—starting from the date our institution joins The Challenge:
Within Three Months: Form a multi-stakeholder working group, or assign an existing group, (which may include faculty, staff, students, administrators, or trustees) to lead the process of establishing the fund guidelines and operating procedures.
Within Six Months: Complete an energy audit for approximately 10 percent or more of the building square footage overseen by your institution. Audits may be conducted by consultants, staff, or other third party groups. The six month benchmark encourages institutions to fill out a GRF Plan of Action, a few short questions that will help us assess your progress in the GRF creation process and offer targeted support.
Within Nine Months: Formalize a guiding document to outline the operational procedures for the fund including the process for reviewing project proposals, making investments, and tracking savings.
Within Twelve Months: Approve fund investment in at least one project.
Once an institution establishes a green revolving fund or for institutions with already established funds, agree to:
- Engage with other institutions that make reasonable requests for advice or assistance (staff time permitting).
- Compile an annual update on the activities of the fund (including its current size, project loans approved, and other relevant information).
There is no fee to participate in The Challenge.
An institution may opt to withdraw from The Challenge at any time. If an institution does not meet a benchmark deadline without asking for an extension, it has three months to become current or may be automatically withdrawn from The Challenge.
To notify us about your intent to join The Challenge, visit our Contact page.
Download the Info Packet with FAQ, Policies of Joining, and the Agreement
Green revolving funds (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, allowing 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 institution’s operating budgets. The Billion Dollar Green Challenge defines GRFs using two criteria:
- The fund must finance measures to reduce resource use (energy, water, etc.) or to reduce carbon emissions (for example, by developing renewable power).
- The fund must revolve. That is, savings attributed to reduced operating costs from funded projects must be used to repay the up‐front project costs to the GRF.
The Billion Dollar Green Challenge is a network of institutions who have committed to creating a self-managed GRF and are working towards implementing cost-saving sustainability projects. When you join The Challenge you become part of a dynamic network of experienced professionals and receive SEI staff support and resources to help you reduce energy expenses and meet your environmental and carbon goals. You will also receive a free subscription to the Green Revolving Investment Tracking System (GRITS), an online tool to help track all GRF and project transactions, measure financial and environmental performance data, and benchmark against projects at similar institutions. You can view the entire list of benefits here.
GRITS, the Green Revolving Investment Tracking System, is an web-based project management platform that tracks revolving fund transactions and data for your institution, including yearly savings and current fund balance. GRITS also calculates financial metrics for both proposed and completed projects, such as ROI and payback, and measures environmental impacts such as reductions in energy and resource use and greenhouse gas emissions abated. To learn more about GRITS, check out gogrits.org.
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. This is the method that has been used to begin some of the largest funds. Some schools have also allowed employees to make contributions to GRFs through payroll deductions.
- 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.
As they generate utility savings from efficiency projects, GRFs provide reliable returns on investment and short repayment periods. Established funds have reported ROIs ranging from 20 percent (Georgia Tech and the University of North Carolina) to 59 percent (Boston University), with a median annual ROI of 28 percent. This suggests that GRFs can not only significantly outperform average endowment investment returns, but continue to identify and finance high-yield projects over the long term. See Greening the Bottom Line 2012 for more information.
A diverse set of institutions are creating GRFs, not just wealthy schools. Over 28 percent of funds are $100,000 or less; the smallest fund ($12,000) is at Bucknell University. Approximately a third of institutions with GRFs have endowments below $250 million.
Colleges and universities of all sizes have created GRFs. Large universities such as Arizona State, Harvard and Stanford have established funds, and so have small four‐year liberal arts institutions such as Allegheny College (Pennsylvania) and Kalamazoo College (Michigan).
Most institutions allow their funds to finance any project that will increase efficiency and reduce resource use. These projects have ranged from lighting and water efficiency retrofits to installing composting equipment. For more information on projects that have been financed by GRFs, see Greening the Bottom Line 2012 (page 43). Some funds, in addition to providing loans, also give grants to projects that will not return savings. These grants serve to finance important sustainability projects and to engage the campus community with sustainability issues. For more information on these types of funds, see the next question.
There are three basic types of green revolving funds:
- Efficiency funds provide capital to energy and/or water efficiency measures. Their goals are to reduce resources and save money. Project ideas are initiated and managed by staff from Facilities, Energy Management and/or Finance Departments. Efficiency funds tend to require a relatively short payback period and are infrequently used to engage the broader community.
- Innovation and engagement funds explicitly seek community engagement in project proposals. The funded projects may have short paybacks, long paybacks, or no payback requirements. Innovation funds often provide loans that require repayment for projects yielding operational savings, and then use these returns to subsidize grants for projects without cost savings. Innovation funds are generally administered by a committee and often include significant student participation and/or oversight.
- Hybrid funds target resource reduction and cost saving, but also consider community engagement and outreach goals. The majority of funds follow this model. They finance efficiency projects in addition to a wider range of initiatives such as renewable energy development, solid waste diversion, and reducing use of materials like paper or synthetic lawn chemicals. Hybrid funds often seek to engage and/or educate the campus community in sustainability efforts. While a broad set of campus stakeholders tend to provide oversight to hybrid funds, responsibility for administrating the fund usually rests with facilities and/or sustainability staff.
Schools have reported average project payback periods ranging from 1 year to 10 years, with a median of four years. After loans have been repaid, additional savings are realized in the utilities budget thereby lowering the institution’s overall operating budget. Some schools stipulate that loans must be repaid within a certain amount of time. Among the schools that require a maximum payback period, the median is six years and the shortest maximum payback term is three years.
There are two ways that institutions have reported paying back their loans.
- Loan Model: The project proponents have direct control over their budget and thus can independently repay their loan. This includes cases where departments or schools control their own utility budgets, or cases where GRF funding focuses on one type of easily controlled project, such as paper, rather than on utilities.
- Accounting Model: Repayment is handled through the transfer of funds to the GRF from a centrally managed budget where the savings were generated (e.g., electricity budget).
Though fund administration varies widely from institution to institution, most have committees that review and approve project proposals. These committees often include administrators, staff, students, and faculty. Two schools (American University and Whitman College) have committees that also include alumni.
Institutions have varied models for their GRFs. While the majority of schools do not charge interest for loans, five schools do. Interest rates range from 1 to 2 percent (University of Colorado at Boulder) to 5.5 percent (University of Minnesota – Twin Cities).