Feb. 9, 2011 | WMU News
KALAMAZOO--Western Michigan University was lauded as a campus trendsetter in a groundbreaking national report released Feb. 9 that outlines how colleges around the nation are saving millions in operating funds by using innovative green financing models.
Successful methods pioneered at WMU were outlined in "Greening the Bottom Line: The Trend toward Green Revolving Funds on Campus." The report was published by the Cambridge (Mass.)-based Sustainable Endowments Institute in collaboration with 11 partner organizations.
Facing rising energy costs and steep budget cuts, the report says, many colleges are grappling with how to finance urgently needed energy efficiency upgrades. In response, more schools are tapping a new option--a green revolving fund or GRF--for financing sustainability improvements, while earning a high return on investment.
Based on the first survey ever conducted about GRFs in higher education, "Greening the Bottom Line" details how GRFs help cut operating expenses and greenhouse gas emissions at 52 schools. The breakthrough in this approach is how cost savings are used to replenish the fund for investment in the next round of green upgrades.
"The trend is clear both in terms of money saved and reduced energy consumption," said Mark Orlowski, executive director of the institute. "The number of green revolving funds has more than quadrupled since 2008. A major incentive is the financial benefit. Our survey found a median annual return on investment of 32 percent."
While most funds are new, the report points out, others have been in existence for a decade or more and have proven consistent long-term performance. WMU has a quasi GRF that has been in existence since 1980--by far the oldest effort noted in the report. The WMU funding arrangement has financed 101 projects, with an average annual return on investment of 47 percent and an average simple payback period of 2.1 years.
"Since 1996, our total project costs have been approximately $5.85 million and our annual cost savings are approximately $2.75 million, with a total cost avoidance to date of approximately $16.71 million," said Dr. Harold Glasser, executive director for campus sustainability at WMU, who worked closely with the institute in outlining WMU's proactive approach to energy operations over the years.
At WMU, rather than establish a formal GRF as many schools are now doing, Glasser says, funding for energy conservation and greenhouse gas reduction is directly built into a deferred maintenance fund and the infrastructure the University has built for utility billing.
"The rationale for not creating a formal GRF, with a fixed principal, is that it would set artificial and inappropriate limits," he notes. "Our goal is to cost-effectively identify opportunities at all funding levels and to strategically employ existing funding mechanisms to reduce our bottom line energy and water costs."
WMU Vice President for Business and Finance Lowell Rinker says that while the SEI survey instrument was broad and included data on a number of campus operations, it was the University's methods for financing sustainability projects that attracted the institute's interest.
"The piece they were intrigued with is our Facilities Management practice of moving forward on projects based on a return on investment model," Rinker says. "Rather than limiting our investment to a certain base budgeted amount, we look at how quick the payback is. We have been using this approach for 30 years and have returned millions of base dollar savings in energy costs. This kind of environmental and financial stewardship is now an ingrained part of our culture."
In addition to WMU, other universities highlighted in the report and the announcement of its release include Harvard and Stanford universities. The report notes a wide variety of projects that are financed through GRFs including the following:
About "Greening the Bottom Line"
"Greening the Bottom Line" reports on the first survey ever conducted about green revolving funds in higher education. Research for the report took place between November 2009 and January 2011 and includes data from 52 universities in 25 U.S. states and 2 Canadian provinces. Funds surveyed range in size from $5,000 at the College of Wooster to $12 million at Harvard University, with an average size of $1.4 million.
About the Sustainable Endowments Institute
The Sustainable Endowments Institute was founded in 2005 as a special project of Rockefeller Philanthropy Advisors. The Cambridge-based nonprofit organization has pioneered research and education to advance sustainability in campus operations and endowment practices.
WMU projects lauded nationally for sustainability