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Business and Policy Areas
Business and Policy Areas

Green Revolving Loan Funds Yield High Rate of Return

February 24, 2011

Facing rising energy costs, coupled with steep budget cuts, many schools are struggling with how to finance urgently needed energy efficiency upgrades. A newly released report, “Greening the Bottom Line: The Trend Toward Green Revolving Loan Funds on Campus,” illustrates the increased use of green revolving loan funds (GRFs) at colleges and universities to invest in enhancing energy efficiency projects, resulting in significant financial and environmental benefits.

The report aims to:

  • Provide basic information on the formation, operation, and performance of GRFs to help institutions interested in establishing their own fund,
  • Enable institutions that have GRFs to learn from each other’s experiences, and
  • Create a baseline for tracking the continuing growth of GRFs in higher education.

The report details how GRFs cut operating expenses and greenhouse gas emissions at 52 schools across the country, and reinvested the savings into the next round of green projects. A variety of projects are financed through GRFs, ranging from dormitory showerhead replacements to retrofitting lighting across a campus. About half the survey respondents were from public institutions, and funds ranged in size from $5,000 at the College of Wooster to $12 million at Harvard University, with an average size of $1.4 million and a median size of $170,000.

Return on Investment and Other Benefits

The survey revealed a pattern of reliable returns on investment (ROI) and short repayment periods, and consistent annual returns ranging from 29 percent (Iowa State University) to more than 47 percent (Western Michigan University). The median annual ROI is 32 percent, suggesting that GRFs significantly outperform average endowment investment returns while maintaining strong returns over longer periods of time. In addition to the strong financial returns of the funds, other benefits include: reductions in energy consumptions; increased tracking of energy, water use and other sustainability data; fostering collaboration between offices of finance, sustainability, facilities, faculty and students; and opportunities for interdisciplinary education and research on sustainability, and institutional assessment.


Michele Madia
Director, Environmental Leadership