Here’s a quick pop quiz to test your knowledge on financing energy efficiency. True or False:
1. Energy efficiency financing provides risk-adjusted returns in the mid-to-high “teens.”
2. Energy efficiency is the hot, new asset class with massive amounts of investment capital catalyzing upgrades in building stocks and industrial facilities across the country to realize significant greenhouse gas reductions in the near-term.
As crazy as it may seem, this paradox exists today. The Conference Board and McKinsey & Co. predict that energy efficiency is a $170 billion per year investment opportunity that can provide an average 17 percent rate of return. At Environmental Defense Fund (EDF) we’ve demonstrated the potential return through our work with leading business partners. Our EDF Climate Corps program has identified investments to date that can create a whopping $439 million of savings in net operating costs. Another example – our work with Kohlberg Kravis Roberts & Co. (KKR) has yielded over $160 million in energy efficiency savings across seven of KKR’s portfolio companies since the Green Portfolio Program began in 2008. Despite all of the promising research and results, we are currently seeing only a fraction of investment capital needed to realize these benefits.
Investing in energy efficiency is important to our goals at EDF to clean up the air we breathe and stabilize our climate, and we set out to better understand how we can catalyze this marketplace. We reviewed the literature; spoke with investors from firms Sustainable Development Capital LLP, Hudson Clean Energy Partners and GE Capital; and captured lessons learned from our work with leading business partners like KKR and programs like EDF Climate Corps. We’ve consolidated the results of our research into a new report, “Show Me the Money: Energy Efficiency Financing Opportunities and Barriers,” which explores how organizations can overcome the challenges to energy efficiency financing and maximize the opportunities that are available for business and our planet. We hope you will utilize the research we’ve collected and join us in stimulating this marketplace. Heck, we would be happy even if you by-passed us altogether and went straight to taking advantage of this lucrative asset class.