The Challenge

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:

1. The fund must finance measures to reduce resource use (energy, water, etc.) or to reduce carbon emissions (for example, by developing renewable power).
2. 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:

1. 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.
2. 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.
3. 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).