A Billion Dollar Green Challenge

Located in Burlington (perennially voted one of America’s most exciting small cities), the University of Vermont’s (UVM) setting in a valley on the shores of Lake Champlain, between the Adirondack and the Green mountain ranges, inspires visitors and residents. Sustainability is integrated into the forefront of the University’s mission, and UVM’s Office of Sustainability aims to foster sustainable development and promote environmental responsibility at the University by strategically bridging the academic activities of teaching, research, and outreach with the operations of the school. As part of its commitment to a sustainable world, UVM recently became the 34th college in the nation to commit to the Sustainable Endowment Institute’s Billion Dollar Green Challenge, agreeing to establish a revolving fund to finance on-campus energy efficiency improvements.

And what a commitment it was.

Thanks to a resolution by the University’s Board of Trustees, UVM will earmark $13M for the fund, making it the largest challenge to date. Harvard University’s $12M green energy revolving fund had previously been the largest.

Greening the Bottom Line

The Sustainable Endowments Institute was founded in 2005 as a special project of Rockefeller Philanthropy Advisors. The Cambridge, MA-based nonprofit organization has pioneered research and education to advance sustainability in campus operations and endowment practices.

The Billion Dollar Green Challenge was launched in Oct. 2011 by the Sustainable Endowments Institute and 15 partners. The program invites colleges to invest a total of $1B in energy-efficiency upgrades delivered through self-managed revolving funds. To date, colleges have committed nearly $80M in total.

The concept underlying revolving green energy funds, which are growing in popularity, is that the funds replenish themselves with savings accrued by reduced energy spending, allowing institutions to make a long-term commitment to energy efficiency and environmental protection that is financially sustainable and even attractive.

“The trend is clear both in terms of money saved and reduced energy consumption,” says Mark Orlowski, executive director of the Sustainable Endowments Institute, which released a report last year titled “Greening the Bottom Line: The Trend toward Green Revolving Funds 
on Campus.”

“The number of green revolving funds has more than quadrupled since 2008,” he says. “A major incentive is the financial benefit. Our survey found a median annual return on investment of 32 percent.”

UVM Takes Up the Challenge
Vermont Governor Peter Shumlin took notice of UVM’s decision to commit to the Billion Dollar Green Challenge, applauded it, and hopes it will have a ripple effect.

“Vermont has long been a leader in energy efficiency, and revolving green energy funds are an important way to continue the progress our state has made in energy conservation,” Gov. Shumlin says. “I applaud UVM’s decision to establish such a robust fund and hope the decision inspires other schools, businesses, and institutions like local and state government to try this approach. The rewards in cost savings and reduction in greenhouse gas emissions make this a true win-win.”

Monies in UVM’s fund will come from cash on hand from tuition payments and other revenue sources, which is normally invested for short periods in low-risk financial instruments before it is spent on operating expenses such as wages, utilities, and supplies.

The $13M represents less than 10 percent of the total cash UVM typically has at its disposal.
“We think investing our cash in energy-efficiency projects, which have a better rate of return than many of our current investments, is a fiscally and environmentally sound way to put our money to work,” says Richard Cate, UVM’s vice president for finance and administration.

UVM’s financial commitment to the fund is as large as it is, Cate says, because there are so many potential candidates for energy upgrades on campus, projects that could lead to substantial cost savings in the mid and long term. The program also underscores the University’s deep commitment to the environment, Cate adds.

Cate shared examples of potential projects the new fund could finance. 
They included installing demand-
controlled ventilation systems in buildings, similar to those in the newly renovated Aiken Center, the main home 
to UVM’s Rubenstein School of Environment and Natural Resources; replacing external lighting across campus with energy-efficient LED fixtures; and upgrading ventilation and lighting controls in older campus facilities.

The University has established two major criteria for projects to be eligible for financing. They must have a payback period of no more than seven years and cost $3M or less. The University is setting a goal of a five percent return for the investment.

Cate expects upgrades could begin as early as next fall.

Partnering for Success

UVM is partnering in the effort with both Efficiency Vermont, a statewide energy efficiency utility operated by the non-profit Vermont Energy Investment Corporation, and the Burlington Electric Department (BED), UVM’s electricity provider.

While the University is developing its own prioritized list of projects it will target, it will rely on BED and Efficiency Vermont to verify the selection and its assumptions about cost and payback period. BED may also assist with energy audits and will provide financial incentives for any new energy-reducing equipment the University needs, lowering its cost.

“We are very happy to be working with two Vermont institutions that have national reputations for their expertise and innovative approaches to energy efficiency and conservation,” Cate says. “We hope our decision helps other Vermont institutions become aware of this important tool for saving energy and reducing greenhouse gas emissions.”

Between 1992 and 2012, UVM spent about $8.6M on energy reduction projects in partnership with BED with paybacks of around seven years.

For a list of the partners in the 
Billion Dollar Green Challenge, including 
Efficiency Vermont, see http://greenbillion.org/about