Friends of nonprofit institutions can offer loans for green energy projects and get a return on their investment
The BIM is a win-win for both institutions seeking viable funding sources and their supporters looking for additional ways to help schools realize significant greenhouse gas emissions reductions.
Several years ago, following a presentation to a small college board of trustees of the college’s climate action plan, one trustee posed a question:
“I have two pots of money: funds I use for charitable purposes, and funds I invest. Is there a way I can invest in this plan and make a reasonable return on my investment while helping the college achieve its goals?”
GreenerU has teamed up with EcoMotion to provide a resounding “yes.”
A unique opportunity for friends of the institution
Although research suggests that sustainability-related giving opportunities grow the pie by expanding giving, development officers have been understandably reluctant to move in that direction for fear of diverting precious donations from pressing operational and capital needs.
The Benefactor Investment Model (BIM) solves this tension by creating an investment opportunity for high-net-worth friends of the institution that: provides a reasonable return on their investment, benefits the institution financially, and helps the institution make meaningful progress on its sustainability goals.
Given the competition for scarce donation dollars—even across a single institution—institutions have an opportunity to engage in a way that:
- Capitalizes on donors’ enthusiasm for their institution’s efforts to address climate change
- Provides individuals a reasonable return on their investment
- Benefits the institution financially
- Avoids drawing from existing funding sources and projects
How does it work?
Developed by the California-based mission-driven clean energy firm EcoMotion, the Benefactor Investment Model is a financing mechanism that provides educational institutions the funding needed for investments in energy-efficiency measures and renewable energy with no upfront costs.
A BIM is, at its core, a “very friendly” power-purchase agreement (PPA). Under this model, tax-paying investors—such as alumni and other institutional benefactors—have an opportunity to provide funding for projects that contribute to institutions’ efforts toward climate action plan implementation and can receive a reasonable return on their investments. This is made possible due to taxpayers’ eligibility for available tax-based incentives for energy-related investments where nonprofits and public institutions are not.
The BIM is a win-win for both schools seeking viable funding sources and school supporters looking for additional ways to help schools realize significant greenhouse gas emissions reductions. The details:
- Schools first identify projects that might be a good fit for BIM. Eligible projects include renewable energy installations on or off campus and energy efficiency improvements in campus buildings. Schools can work with GreenerU and/or EcoMotion to evaluate, engineer, and manage project viability.
- Schools recruit investors and raise capital—whether from high-end donor lists, boards of trustees, for-profit companies, alumni, or other friends of the institution.
- Investors form a special purpose entity (SPE). An individual or group of investors, as recruited above, invests required funds in a Sub-S Corporation or LLC, which in turn acquires, installs, owns and manages the “green assets.” GreenerU and EcoMotion have the tools and expertise to act as owners’ representatives in setting this up.
- The owner’s representative manages the energy project throughout the term of the investment. GreenerU and/or EcoMotion are prepared to serve as owner’s representative, managing both implementation and operation of the SPE.
- Schools enter into a PPA with the SPE. From the moment energy-saving and renewable energy equipment is installed, the institution pays for energy at a reduced rate (typically 5-10% lower than current rates) for a fixed time period.
- Benefactors receive a return on investment, then donate capital assets. Within six to ten years, the tax benefits plus the institution’s energy payments under the PPA will have repaid the full cost of the installation, at which point benefactors will have recouped their entire investment with a healthy return. Benefactors are then eligible for a charitable contribution tax deduction by donating the SPE to the institution.
- Any special purpose entity (SPE) will be project-specific. It will generally be a corporation that owns the energy assets which in turn would be owned by the benefactors. The SPE will sell the outputs—solar power, energy savings, etc.—to the host institution and ultimately be donated to that institution once payback to investors is achieved.
Contact us to explore the Benefactor Investment Model with your institution today.