Vermont Green Revolving Fund Leaders Initiative May 2013 Report to High Meadows Fund By Richard Donnelly (VEIC) and Mark Orlowski (SEI) Executive Summary In 2011 the Vermont GRF Leaders (VGRFL) project set out to “ advise colleges throughout the state on investing in urgently needed but capital intensive energy efficiency building upgrades Specifically, the project will encourage capitalizing green revolving funds (GRFs) with endowment investments capital reserves, operating budgets and/or alumni donations.” Within one year of the VGRFL launch in June 2011, Vermont led the nation with the most GRF’s of any state, serving over half of Vermont’s colleges and approximately 75 percent of the market's square footage, setting the stage for an aggressive campaign of energy efficiency investments across the state for the foreseeable future At this date the committed amount of new capital available for energy efficiency investments is approximately $16 million dollars (aggregated), including the nation’s largest university GRF ($13 million) at the University of Vermont, and the country's first system-wide fund at the campus Vermont State Colleges (VSC) with a $2M commitment A full list is attached to this report This work took place in context of the Sustainable Endowments Institute’s Billion Dollar Green Challenge, a national initiative designed to encourage large-scale investment in energy efficiency by universities and other nonprofit institutions In 2012 and early 2013, our focus has shifted to helping colleges go from a commitment to implementation to operationalization of their funds We, the grant partners, the Sustainable Endowment Institute (SEI) and Vermont Energy Investment Corp (VEIC), have worked with each college to overcome some of more mundane operational barriers such as identifying an accounting process for moving the money So far, the big three UVM, VSC, and Middlebury - have launched their funds and have recently begun making investments on their campus In the coming years, as we see this new capital deployed and existing GRF capital revolving, we will see the impact of these funds increase over time and, in theory, in perpetuity Many factors influenced the success of this effort and we’ll explore some of the lessons learned below Ultimately, because establishing a GRF requires a decision to commit and deploy a sizable amount of capital, campus leadership must see a GRF as a bridge between their own vision and goals and their role/identity as stewards of our future and of environmental and financial resources Our work also inspired the Sustainable Endowments Institute to scale this effective engagement model pioneered by the Vermont GRF Leaders project and launch the New England Leaders in Energy Efficiency Financing (LEEF) Network last year Through the generous support of the Barr Foundation and the John Merck Fund, SEI is now engaging colleges, hospitals and other nonprofit institutions in Connecticut, Maine, Massachusetts, New Hampshire and Rhode Island and helping to establish green revolving funds across New England Lessons Learned Engaging Leadership & Other Campus Staff There is no substitute for engaging the top leadership and gaining their interest in not only the idea but also how it aligns with some of their key priorities If your aim is to ultimately transform an entire market then you will want to strategically engage key influencers in a way that allows you to leverage that leadership in order to gain the interest of other peers Having two or three market leaders in the forefront of the issue is a gift; it can grab the attention of the others and you can use that momentum How you access those key influencers can sometimes require looking across your network to find another person who has a valued relationship with the leader An outside connection can accelerate attention on the topic in a way that an internal champion cannot Working closely with facility staff and/or sustainability coordinators on campus as you strategically seek access to the president is also very important The support for the idea throughout the organization should be unanimous and your work must be seen as beneficial to the efforts of those whose access and influence with the president may be marginal Convening Leaders Using the influence of those early leaders, we convened a Vermont Green Revolving Fund Leaders Symposium on October 4th at the Basin Harbor Club in Ferrisburgh This was a turning point in the initiative The day-long (10 AM – 2:30 PM) event was very well attended (representatives from 14 colleges attended; see attachment) and the response was entirely positive Representatives from non-VT peer institutions presented on their experience and results from creating their GRF’s Several college presidents stood up in front of their peers and committed to creating a GRF The event created enough additional excitement that within a few months we were working with multiple schools, helping pull together proposals, opportunity assessments, and connecting them with peer institutions in the country that had already created funds Identifying the Internal Champion The President or Chancellor may be the ultimate champion and decision maker, but without identifying another internal champion on the college staff, one that fully understands the operational dynamics and has the respect of other key campus stakeholders, moving from commitment to implementation will be difficult Working with that person(s) to understand the politics and process that the GRF will take, helped us identify and anticipate barriers and roles we could play to help overcome the obstacles Understanding the Need for a GRF From the beginning a key strategy was to demonstrate that GRF’s were going to help VT colleges accelerate excellent investment opportunities on their campus, many of which we had previously identified, and all of which were competing against costs in a constrained annual budget To reinforce the idea we framed their past projects as investments which enabled the college presidents and finance professionals to understand the wisdom of separating these projects from the budget process and treating these as investments Once a commitment to a GRF is made and the process for establishing the fund begins, it is wise to build a project pipeline in parallel so the school is ready to hit the ground running with investments Knowing that there are savings opportunities waiting for funding can help motivate stakeholders to resolve some of the operational details that need to be answered Sharing Between Institutions From the beginning SEI’s strategies for their national GRF effort (Billion Dollar Green Challenge) was built upon a sharing model In the beginning of this initiative, the key resource that SEI brought were the case-studies and framework rationale for GRF’s Conceptually, the GRF is a contagious idea, and our experience was that college presidents and vice-presidents of finance were able to quickly grasp the idea and move to the central question of how the financing mechanism fit with their schools goals, needs, priorities, culture, etc Hearing from or about other schools was always a powerful leverage point not only from the conceptual/illustration Vermont Green Revolving Fund Leaders Initiative angle, but also from the competitive perspective that these colleges live in UVM’s fund was established at $13M, which was exactly $1M more than Harvard had in their fund This was not a coincidence Once a decision was made to proceed, this sharing model became even more important Overcoming operational barriers benefited from considerable sharing between institutions that had established funds and those who were creating them VTGRFL facilitated several sharing opportunities through webinars, draft proposal documents, and one-one conference calls addressing specific issues such as accounting or strategies for capitalizing a fund through the development office Similar to one goal for SEI’s investment tracking tool (GRITS), sharing info about funded projects amongst schools (especially within a state college system) sparks good ideas for other campuses and promotes economies of scale A Closer Look: Vermont State Colleges $2 million dollars was committed to the GRF VSC had a substantial amount of cash accrued that was not earning any return and decided that a portion of this cash would be better utilized as a GRF EVT and SEI worked with VSC admin to draft a GRF proposal which was then submitted and approved by the VSC trustees in early 2012 VSC thus became the first state college system to establish a fund EVT assisted VSC with the educational outreach to each of the college presidents and their staff In the summer of 2012, the fund had been launched and initial projects were submitted to the fund, three of which were approved There were (3) projects approved for this initial funding cycle out of the (5) submitted: Johnson State – campus-wide LED exterior lighting retrofit Castleton State – ice rink improvements (enabling use of cold water for resurfacing) Community College of Vermont – networked PC power management These projects are now being implemented The next round of applications are due end of June and here are a few of the likely projects we are helping quantify: VTC – biodigester heat recovery (to convert the planned biodigester into a true combined heat-andpower site) Lyndon – pool HVAC improvements Johnson – pool HVAC improvements VTC – LED exterior lighting With some of the funding barrier now mitigated, facilities managers have now been willing to run the legwork of scoping, bidding, and implementing EE projects Their time (or lack thereof) serves as the next challenge to overcome to accelerate EE investments With this fund now in place, we’ve seen more coordination and collaboration from each of the facilities management teams Previously there was very little of this type of sharing and cooperation Remarkably, the efforts of one campus are starting to spillover to ideas for peers And there have been a few long-standing deferred capital projects related to improving the pool HVAC infrastructure on at least (3) of the campuses that will likely be submitted to leverage GRF allocations Collaboration & Partnerships SEI & VEIC/EVT were inter-dependent partners in this effort, both bringing many strengths including technical knowledge, relationships, financial acumen, strategic planning, and account management Neither of us would have been able to accomplish this on our own in this short time frame VEIC/EVT brought an understanding of the Vermont market and specific relations from within the market that helped advance the discussion at the highest levels SEI brought a well-articulated vision of the investment opportunity and environmental imperative, and developed the critical non-Vermont relationships with peer institutions that provided our schools with useful models to consider Internal Organizational Impact of Project This effort brought tremendous value to VEIC and Efficiency Vermont, positioning our organization and program as a strategic partner to a high profile and influential customer (not to mention a high energy user) Our work which has often been primarily transactional in nature (i.e assisting on project level with technical assistance and incentives) was now perceived as transformational and at a strategic partner level Through SEI we were able to bring expertise and a well-articulated vision which we learned from SEI also worked with us side by side as we engaged customers at every step of the way This high-functioning and effective partnership made each of us more effective than we could have been individually - all to the long term benefit of our customers and the environment Efficiency Vermont was able to leverage their technical and financial analysis as supporting mechanisms to helping these institutions see the value of looking at these as investments not costs Feedback to HMF HMF served as valuable hub for relationships and offered ideas that helped advance this initiative HMF staff acted as a vested partner and our initiative was better for it The occasional informal check-ins allowed for conversation and exploration of ideas and introduction to new resources and relationships For example having access to Gaye allowed us to present our thinking and invariably Gaye had a name or suggestion that improved our strategy Next Steps With any transformative effort, as you peel away the main obstacles, other barriers reveal themselves At one of the colleges, a commitment was made only to have progress stalled by a health issue At another school, the GRF was established but that revealed a lack of facility manager time to focus on energy issues in the face of everyday priorities These are non-trivial problems and may require some innovative solutions and new ways to consider ourselves as a resource for overcoming that barrier The next steps (and lessons learned) is followthrough and look for creative solutions that fit with the barriers Many of the lessons learned from VGRFL initiative are now being applied to the healthcare market here in Vermont and more broadly through the institutional markets throughout New England States through the Leaders in Energy Efficiency Financing (LEEF) initiative This is a foundation funded project led by SEI SEI, VEIC, and Health Care Without Harm are all exploring how GRF's can help bend the cost curve in the healthcare market as part of a broader package of sustainability-related goals aimed at health care’s triple aim: lower costs, improved patient outcomes, and improved community health