ShoreBank Blog
The ShoreBank Blog is your place to find ShoreBank news, new product information, and our insight into the banking world.
Posts Tagged ‘green building’
Wednesday, October 29th, 2008
One of the most interesting changes in the energy efficiency arena is the extent to which finance has come to be more fully recognized as a key element of any effort. This recognition represents a fundamental shift from just a few years ago, when ShoreBank launched its energy efficiency lending programs, including our Homeowners’ Energy Conservation Loan Program.
The shift comes at an interesting moment given the turmoil in the banking sector, but I think presents a unique opportunity to develop more inclusive and creative financing options. With loans from conventional sources more difficult to come by, ensuring low cost, accessible financing options is critical. Developing these new lending vehicles will likely mean reaching out to more creative lenders, such as community development financial institutions (CDFIs).
In the past, CDFIs have been largely absent from policy discussions around energy efficiency, yet they present a tremendous vehicle for reaching less affluent communities and for leveraging philanthropic, utility, and public benefit funding. One only has to look at the excellent work done by The Reinvestment Fund in Philadelphia to see the possibilities. With home equity loans practically non-existent, reaching carbon reduction goals will require a broader dialogue and new partnerships.
Indeed, the credit freeze could not have come at a more inopportune time given climate goals. A recent analysis conducted by the World Business Council for Sustainable Development suggesting existing homes must reduce energy usage by a much greater levels than previously thought if carbon goals are to be met. However, the lack of financing options for homeowners presents one more impediment to meeting climate goals.
Tags: CDFIs, community development, energy conservation loans, green banking, green building, ShoreBank, triple bottom line
Posted in Green Collar | 5 Comments »
Tuesday, October 21st, 2008
Wow! So much has changed in the banking world since I last checked in. While adjectives describing this change abound, few include “innovative.” It is the topic of innovations in green banking that I would like to discuss today.
Since the 1990’s, ShoreBank has been a pioneer in the field of green banking. Our conservation loans are good for the environment but also help our customers save money by reducing their utility bills. We carefully measure our conservation loans each year and look to find ways to increase our ability to do more lending in this area.
Last year, ShoreBank made $127 million in conservation loans. Many banks tout themselves as “green” for offering online bill pay and electronic statements, but ShoreBank backs up its claim by specializing in lending to homeowners to help make their houses more energy efficient and to projects that will create LEED certified green buildings.
ShoreBank’s commitment to being green is also reflected in its own branches and service centers. For example, ShoreBank’s new Central Loop Branch features:
* Recycled content flooring and ceiling tiles
* Energy efficient and zoned lighting
* Recycled content cubicle fabric
* 100% recyclable desk chairs
* A completely green galley kitchen that includes bamboo cabinetry, recycled glass countertops, recycled and porcelain flooring
ShoreBank is also committed to implementing green innovations in the target communities it serves— low-income, minority neighborhoods in Chicago, Cleveland and Detroit. One example of ShoreBank’s commitment to conservation lending is the construction financing ShoreBank provided for the Genesis Housing Development Corporation’s “Urban Green House.” Constructed in Bronzeville, a south side Chicago neighborhood it was the area’s first single-family environmentally sustainable home. With cost-saving green features such as central lighting shafts, cooling floor slabs, and a thermal rock bed and garden, the “Urban Green House” has been rated as the “greenest” new single-family residence in Chicago.
“There is sometimes a stereotype that ‘green’ consciousness only happens among a certain demographic and in affluent areas,” said Holly Marshall, Director of Operations at Genesis Housing Development Corporation. “The Bronzeville community has embraced this creative and eco-friendly approach to affordable housing and welcomes many more similar projects from ShoreBank in the future.”
Clearly, it is an exciting time to be involved in conservation banking. As I write this blog, a nonprofit organization called the Climate Group has just proposed “the UK Green Banking Charter” which would guide banks through the vital aspects and elements of green banking.
ShoreBank prides itself in its history of sustainable environmental leadership, and we’re confident that our expertise, investment, and innovation in conservation lending will continue to help change the world.
Tags: community development, energy conservation loans, green banking, green building, ShoreBank, triple bottom line, Urban Green House
Posted in Green Collar | 3 Comments »
Tuesday, October 7th, 2008
An increasingly popular idea about how to finance alternative energy and energy efficiency improvements involves the use of performance contracts or power purchase agreements (PPA). These types of financing arrangements involve a third party installing and owning the energy systems and then leasing the improvements back to the building owner. The structure has been used extensively by governmental entities (especially school districts) and by large Fortune 500 companies such as Google, Wal-Mart, etc.
At ShoreBank, we have been working for some time on what we call a “PPA for the rest of us” – meaning, performance contracts and PPA arrangements involving deals of less than $1 million, which cater to small nonprofits and other institutions, such as affordable housing projects, charter schools, and religious institutions. As we have explored doing so, we’ve discovered that these arrangements are far more complex than many people recognize. Aside from the credit issues that accompany these types of organizations, the long-term nature of the contracts and requirements for performance guarantees also present significant obstacles. Because the deals specify a fixed payment schedule from the beneficiaries, the interest rate on the financing must be fixed for the life of the agreement, usually 15-20 years in length. This fixed rate presents a significant hurdle given the lack of any secondary market. Similarly, due to the small size of the projects, and economic development goals, such as by small, minority contractors, performance guarantees are a concern. The firms involved are typically under-capitalized and therefore lack the financial strength to make the lender whole should the performance not meet required standards at some point in the future.
We believe that performance contracting and PPA arrangements offer a fantastic opportunity to promote energy efficiency and alternative energy. However, foundations, utilities, and governmental agencies must begin to partner with financial institutions to develop the requisite funding mechanisms and to create new types of performance guarantees if we are going to broaden the array of potential participants. Given the current financial crisis, we believe doing so is even more critical than ever and hope other partners will join us as we begin to pilot these initiatives.
Tags: community development, energy conservation loans, green banking, green building, power purchase agreement, ShoreBank, triple bottom line
Posted in Green Collar | 2 Comments »
Tuesday, September 23rd, 2008
At a recent conference on green building and investing, a number of important critical trends were highlighted for the burgeoning green building industry. Put on by Infocast, the conference was one of the better gatherings I’ve attended on the subject.
One interesting session focused on the increasing complexity of green leases. A particularly salient discussion explored whether tenants should be eligible for rent reductions, or even lease nullification, should the building not achieve a LEED rating. Another interesting facet centered on roof rights and whether tenants deserved some say over where HVAC units were placed, since poor planning could limit or even eliminate future solar options – indeed, this issue is one ShoreBank has faced as we have sought to add on-site energy generation on our leased facilities.
Other topics that received considerable attention were the operational issues facing green buildings given findings from a new study funded by the USGBC that documented how often green buildings failed to achieve the energy performance predicted by pre-construction energy modeling. Among the recommendations was a need for greater training among building engineers, and perhaps, greater reliance on technology and outsourced building managers. It is a problem particularly for our non-profit customers since these organizations’ portfolios contain both the most out-dated, and the most technologically sophisticated, buildings. Having staff who are able to run both on a shoe-string budget is a lot to expect.
Finally, the conference included a fantastic session on appraisal issues facing green buildings. The most interesting comment was that investors, and increasingly banks too, now believe green buildings have less chance of obselescance than other buildings – especially as carbon markets and caps become more and more likely in coming years. This belief is beginning to influence valuations and the underwriting of these projects.
Tags: community development, energy conservation loans, green banking, green building, ShoreBank, triple bottom line
Posted in Green Collar | 1 Comment »
Tuesday, September 9th, 2008
During the past year, ShoreBank has been involved in a number of discussions about residential energy efficiency. Indeed, it is a key element of most climate plans due to the fact that homes represent upwards of 30% of the greenhouse gas emissions in most large cities.
One of the most interesting aspects of the dialogue is the difference of opinion about whether homeowners are making rational or irrational economic choices when they select inefficient homes.
For some, the inefficient homes and offices in America reflect conscious choices by consumers about the inadequate pay-backs from investments in energy efficiency or alternative energy. I respectfully disagree, instead believing that consumers rarely have the relevant information to make informed choices or the ability to choose since so many of the decisions in rehab projects are influenced by contractor/architect knowledge, opinions, and proclivities.
In addition, I feel the decisions are reflective of human psychology and the fact that we generally fear loss more than value potential gain. Thus, consumers are troubled by having to bet on expected future savings given the known and real upfront costs, irrespective of the projected ROI on these investments. It is one reason for the emotional appeal of the performance contracting model – a guarantee of future savings by a third party coupled with no upfront cost to the consumer. I also see traces of the human tendency to discount the potential for future price increases over potential price reductions, despite mounting evidence that cheap power is not coming back any time soon. We simply fear spending money to protect us from potential future shocks that may not occur more than we fear being unable to afford our utility bills in the future, even if we see the increases as inevitable.
These beliefs form the lynchpin of ShoreBank’s approach to sustainability. Underlying our efforts is the belief that all people, regardless of income or upbringing, care deeply about elements of sustainability since sustainability touches such fundamental aspects of our lives. In essence, sustainability is about household economics, job security, health, well being, and our community. The reason that more people are not choosing more sustainable lifestyles, in part, reflects our society’s failings in helping individuals make informed choices, in presenting easy to understand and easy to implement changes, and in crafting clear, targeted messages.
Tags: community development, environmental sustainability, green banking, green building, ShoreBank, triple bottom line
Posted in Green Collar | No Comments »
