These are just a few examples, he says, of an unfortunate ecosystem that not only trucks tons of recyclable waste to landfills across North America but one that eliminates local jobs as well. “The great thing about recycling is that when you recycle, local industry has to process it as opposed to when you send to a landfill.”

It is an evolving—emphasis on the gerund—time in the recycling industry, which has expanded in recent years with multiple players entering the market, from massive multinational and national billion dollar companies to small, family-owned businesses. The last decade has also seen significant innovation enter the field—such as optical sorters, which recognize and sort different materials, Radio Frequency Identification (RFID) tags to identify products, and trucks using fully automated arms. But there is room for improvement. A 2015 report by the Natural Resources Defense Council and As You Sow found that the United States recycles only half of discarded packaging and 34.5 percent of municipal waste.

Enter the Closed Loop Fund, founded in 2013, which describes itself as a “social impact fund investing $100 million to increase the recycling of products and packaging,” with goals of creating more than 20,000 jobs locally, diverting more than 20 million tons of waste from landfills, and eliminating 50 million tons of greenhouse gas by 2025.

“I had been thinking for a while about how to organize the largest consumer goods companies in the world to collate their capital in one place that could then be used to solve systemwide obstacles [in recycling], which they would benefit from if they were eliminated,” says Gonen, the fund’s CEO and co-founder. “The issue I had was the amount of capital required from each of these companies was going to be challenging to access because it would require CEO or top executive sign-off. To get that from the top consumer goods companies—some of whom are rivals or in different industries—was going to take years.”

That is where Rob Kaplan came in. Now a managing director at the fund, Kaplan was, at the time, leading product sustainability at Walmart, “which was seeing a lot of bottom-line benefits from recycling but saw limitations in the infrastructure that existed. They wanted to know what needed to be done to build out that infrastructure since they saw such a bottom-line benefit to recycling,” Gonen says.

Together, Gonen and Kaplan worked to build out the fund in two years, amassing 10 backers from some of the largest retail consumer goods companies in the world, such as PepsiCo, Coca-Cola, Unilever, 3M, and Colgate-Palmolive, each with a $5 million minimum investment. Gonen says the 10 investors saw the “tremendous promise in the financial product, and in most cases our argument was compelling enough to sign off on a large investment.”

Thus far, Closed Loop Fund has made seven investments in the recycling industry. It has invested in recycling equipment for a facility in Chicago; recycling carts for Portage County, Ohio; and trucks and carts for a facility in the Quad Cities region of Iowa. QRS Plastics, a facility in Maryland that processes hard-to-recycle plastics—numbers 3 to 7—from recycling companies on the East Coast, also received backing from the fund.

From public companies to municipalities, the investments vary in location as well—with a focus on increasing the recycling infrastructure in previously underserved regions. “In the Northeast and Mid-Atlantic there is good infrastructure. On the West Coast and Pacific Northwest, there is fairly good infrastructure,” says Gonen. “The infrastructure is generally not as good in the middle and in the south of the country.” When evaluating potential investments—the fund has received more than 160 applications—Gonen says they ask themselves a few integral questions: Can this project scale? How many tons will it divert? Can it provide the needed reporting? Can it pay back?

“We are representing capital from some of the world’s largest consumer goods corporations that want this material back in their supply chain, so we need to invest in projects that will provide significant amounts of material back in the supply chain,” he says.

Closed Loop Fund is also looking to invest in a solution for the building industry that could use recycled glass as a replacement for fly ash, which goes into cement. It also could help solve a big obstacle in the recycling industry: Currently there is no market for recycled glass, which is hurting profits at recycling companies. “This is an opportunity for the building industry to become much more sustainable. Rather than using a byproduct of coal, you are using recycled glass,” Gonen says. “So we are working on [an] investment in the two companies that have that technology, and Google is looking at potentially being the first to use it in their buildings.”

It is Gonen’s hope that as things improve on the technology side of recycling, they will also improve where recycling begins—at the individual level. “The macro issue is that business and citizen don’t recognize the cost of not recycling,” Gonen says. “The cost of not recycling is not, unfortunately, ‘I didn’t do the right thing.’ You pay to send it to the landfill.”

“People say, ‘I know it’s the right thing to do—I should do it,’” he says. “What we need them to say is, ‘Of course I recycle. I don’t want my tax dollars being used to send things to a landfill.’ If we can overcome that obstacle, then behavioral change happens in a major way.”

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Those times with his father taught Fedrizzi a healthy respect for work. But more importantly, it gave him a deep reverence for the earth—what Fedrizzi calls his “ability to recognize that our biosphere needs to be respected.”

Under Fedrizzi’s direction, USGBC now leads a segment of the global real estate industry with an expected value of more than $3 billion by 2020. The catalyst for that growth has been USGBC’s Leadership in Energy and Environmental Design (LEED) rating system. Currently there are LEED projects in more than 150 countries and territories, encompassing 14.4 billion square feet of space (including 4.5 billion square feet that is already certified).

Now, Fedrizzi has explored the role of construction in the future of the planet—in the context of how our country can reduce C02 and thrive economically—in his book, Greenthink: How Profit Can Save the Planet (Disruption Books). Proceeds of the book go to USGBC’s Project Haiti and Center for Green Schools initiatives.

Proceeds of Greenthink will go to the HOK-designed William Jefferson Clinton Children’s Center in Port-au-Prince, Haiti.

Proceeds also benefit the Center for Green Schools, which promotes global initiatives such as the annual Green Apple Day of Service. Bottom Photo: Ana L. Ka’ahanui

Leonardo DiCaprio, who calls Fedrizzi’s work “revolutionary,” lays out the potential peril to the earth in the book’s foreword, in which he states: “We are living during a period of change unprecedented in the history of our planet.”

In Greenthink, Fedrizzi demonstrates that environmentalism and profit-based business can do much more than simply coexist. They can work together in sublime, syncopated fashion, building on each other for the benefit of the planet and its people. As Fedrizzi writes in his book, “The most successful environmental organizations today work with business, to show them how much money they can save—and/or make—by transitioning to sustainable business practice.”

It is a matter, Fedrizzi says, of rising above the divisive mood of politics, learning how to collaborate, and staring down the old-school attitude that profit and environmentalism do not mix. In fact, business has the potential to succeed in environmentalism in a way that the government has not, he says.

Fedrizzi reflected on the global agreement to reduce global warming, reached this past winter, at the United Nations Climate Change Conference in Paris. The unprecedented consensus was a big step forward, but now, Fedrizzi says, governments must ratify it.

“It’s the best intentions and the best strategy,” Fedrizzi says of the agreement, “but now the governments have to put their intentions into action.”

Fedrizzi says there is a clear way around the slogging nature of Congress today. “The real change won’t happen in the Paris conference rooms; I think it will happen in business boardrooms,” he says. “Business is the answer; incentives matter. We have to do it the right way.”

Environmentalists, he writes, have traditionally treated the business community as an antagonist, and with good reason. “For a long time, industry was the opponent,” Fedrizzi says. “Today the game has changed—completely. Sustainability is now profitable.”

He mentions businesses that are taking big steps with no urging by government. “Look at companies like Colgate-Palmolive, which has its own carbon-reduction strategies,” Fedrizzi says. “That’s exciting.” Other companies are linking with environmental nonprofits to act more sustainably, he says, such as the Environmental Defense Fund convincing McDonald’s to change its packaging.

The caveat: Such work must be third-party certified, to prevent greenwashing and incidents such as the Volkswagen debacle, in which the German carmaker admitted to cheating on emissions tests in the U.S. “I think everything must be data driven and transparent,” Fedrizzi says. “Everything needs to be third-party certified.” When third-party certification is in place—as it is for LEED through Green Business Certification Inc. (GBCI)—consumers get solid information they need to make confident choices in the marketplace, he adds.

Fedrizzi mentioned the Global Real Estate Sustainability Benchmark (GRESB)—operated by GBCI—an industry-driven organization that assesses the Environmental, Social, and Corporate Governance (ESG) performance of real estate assets around the world. Collection of real data, Fedrizzi said, means that sustainable assets then become a basis for large investors’ decisions for their portfolios.

This concept—incentivizing businesses to embrace sustainability—took root for Fedrizzi in the 1990s, when he was a marketing executive at Carrier. “When I was asked by the CEO to help green the company, I knew ozone was just one piece of the story,” he says. “We looked at the refrigerant, the packaging, recycling, transportation, acoustics, air quality, and thermal comfort. When you put that together, you’ve got a holistic story.” It was an enormous success. From there, Fedrizzi teamed with David Gottfried and Mike Italiano to create USGBC.

When USGBC was established in 1993, there were 13 member organizations, 11 of which represented business. “There were 13 members for a very long time,” Fedrizzi says. Today there are more than 12,000 member organizations. Buildings are a substantial piece of climate change, accounting for 40 percent of the world’s energy consumption and a third of all greenhouse gas emissions.

Fedrizzi predicts that in the next 10 to 20 years, LEED certification levels will rise and displace what we know as current building code. As the floor for what is acceptable rises, says Fedrizzi, everybody benefits. “And, at some point, we quit measuring sustainability in square feet; we begin measuring in buildings and entire communities. We have to keep our minds open and think about the context of what world we’re moving into.”

That is what is required, because climate change is such a massive issue, Fedrizzi says. It can be mind-boggling: “Peel back the onion one more time, and we discover another layer.”

“People think, ‘What could I possibly do?’ We could eat less beef, carpool, make better choices. There are so many things we could do, but we get paralyzed.” Setting ourselves on the right course, he says, boils down to education, inclusion, and collaboration. At the end of the day, it isn’t about worlds of government and industry sectors: “It’s all about the people.”

Greenthink implores environmentalists and millennials not to waste an opportunity to participate in what could be a new environmental movement. “Don’t ignore the marketplace,” he writes, “embrace it.”

“Profitability,” Fedrizzi writes, “is sustainable.”

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A look at green building adoption in
Chicago, New York, and Washington, D.C.

 

Whether you get your hot dog from a cart in Manhattan, “drag it through the garden” in Chicago, or order one at Ben’s Chili Bowl in Washington, D.C., you are stopping for a snack in one of the nation’s green building apexes.

“Each of these three cities is an example of a strong sustainable market,” says Dave Pogue, global director of Corporate Responsibility at CBRE, which published its “National Green Building Adoption Index” in June of this year. The index aims to measure the growth of green building certification—either EPA’s ENERGY STAR program or the U.S. Green Building Council’s LEED—for the top 30 U.S. commercial markets over the past 9 years.

But like their culinary offerings, Chicago, New York, and Washington, D.C. have marked differences in how and why their real estate sectors have adopted sustainability. “Chicago is the most dynamic of the markets,” Pogue says. “It has really embraced green building practices more than average.” More than two-thirds of Chicago’s square footage has one or more green building certifications, placing the city number three in the index. This was a surprise, says Pogue, due to the immense size of the metropolis, but the reasons why are multipronged.

“Chicago is a first-tier city,” he says. “They have very large buildings and very large corporations. There are civic ordinances requiring certain disclosures such as ENERGY STAR scores.” While green certification used to mean you were ahead of the pack, these days it is something you must maintain to stay competitive, he adds.

In Washington, the capital’s well-known building height restrictions kept them lower in the rankings, which measured percentage of space rather than number of buildings—at eighth place. But the nation’s second largest commercial office market—second only to Manhattan—has more than 40 percent of certified green space. “D.C. has adopted green building,” says Pogue. Much of that has to do with the U.S. General Service Administration (GSA) comprising the bulk of its tenant base and occupying ENERGY STAR-labeled buildings. “Buildings want to lease to the number one tenant in the city,” he says. “There are also lots of institutional owners. They tend to go for certification more than private owners.”

In terms of ordinances supporting green buildings, no one ranks higher than New York City, says Pogue. “They were the first. They have disclosure requirements and energy audits that buildings have to do. It’s not just disclosure—it’s physical action. Clearly a first-tier city,” he adds. Again, the high institutional owner base is sophisticated, though New York City does not have the active government or technology tenant base of other cities like D.C. and San Francisco. In terms of percentage of green space in a market, Manhattan ranks 12th.

Chicago, New York, and D.C. remain three of the most dominant cities in America——but there is concern about abatement.

“We are concerned that we may have had hit a peak because so many of these buildings have become ‘sustainable,’” says Pogue. “In some of these cities, particularly in Chicago, a high percentage of real estate has attained these certifications. The challenge is: How do you maintain and how do you add to a very large base?”

More than two-thirds of Chicago’s square footage has one or more green building certifications.

Nick Stolatis, senior director of Global Sustainability & Enterprise Initiatives, Global Real Estate, at TIAA-CREFF, says, “I think all three cities are maintaining momentum. It’s a steady process and that is really what we want to see—the long-term commitment is important. More and more owners and more and more managers are getting on board. The tenants are sophisticated enough and more and more of them are asking what they are doing.”

It’s how TIAA-CREFF approaches its $86 billion of assets under management. “I would argue that all of it is being operated under sustainability for the long movement. In our global real estate initiative, there are three key principles we apply: conservation of energy, reduction of waste, and benchmarking our assets.”

Pogue points out that it is important to remember even a decade ago was a very different time for green certification. There was little adoption of ENERGY STAR program and LEED was still in its infancy. “Fast forward to 2013/14, and we have found a dramatic uptake of these certifications in particular markets.” In 2015, it means that growth in the 30 largest markets continues, but at a slower pace—indicating that many of the buildings that can get certification have sought it.

So what’s next? “That is the question we have asked ourselves,” Pogue says. “Here is a giant city like Chicago, where two-thirds of its buildings are green. How are you going to the next tier? This is where the problem lies.”

The problem can be better understood in terms of building size. More than half of all buildings over 250,000 square feet are currently certified. This represents 67 percent of those buildings’ total square footage. The figures are 62 percent and 76 percent, respectively, for buildings over 500,000 square feet. Compare this to buildings under 100,000 square feet, where less than 5 percent of buildings have a certification, which comprises 7 percent of their total square footage.

“This is a big buildings phenomenon,” says Pogue. “It’s skewed toward large buildings.

“The industry needs to understand how to get the message to smaller owners,” he adds. “This is trench warfare—hand-to-hand combat.”

“Size is definitely has an advantage,” says TIAA-CREFF’s Stolatis. “Office buildings tend to have more opportunities for the landlord to save energy and money. That isn’t to say smaller buildings can’t be improved. Our approach is, we want to engage with those residents to advise and help them reduce their cost.”

Energy costs may be a good starting point with smaller building owners, especially in less positive economic times. “When we get into a touchy market again—and we will—that may be when smaller building owners do it,” says Pogue.

“It has to do with economics,” he adds. “For buildings who have not previously participated, the next downturn may be the next opportunity.”

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Fannie Mae rewards sustainable buildings with lower interest rates.

 

The site of an old police station in Maplewood, New Jersey, has been transformed into a shining example of adaptive reuse and the real financial benefits of achieving a green building certification. Built on a once environmentally contaminated site, The Station House is a 50-unit, mid-rise, multifamily rental property that earned the U.S. Green Building Council’s (USGBC) Leadership in Energy and Environmental Design (LEED) Certification for its use of recycled materials, efficient water management, and green power.

In April of this year, Prudential Real Estate Investors (PREI) acquired the Station House property using Fannie Mae’s new lower interest rate on loans for properties with green building certifications, including LEED, ENERGY STAR^®, Enterprise’s Green Communities Criteria, and five others. Multifamily owners may receive a reduction in the all-in interest rate of 10 basis points (for example 4.0 percent to 3.9 percent) for refinance, acquisition, or on a supplemental loan if the green building certification is awarded and current at the time of loan close. In the case of the Station House, this reduction will translate to a savings of more than $100,000 over the life of the nearly $10.2 million loan originated by Wells Fargo.

“For the first time, Fannie Mae multifamily lenders will be able to reward owners for investing in high-performing properties,” explains Chrissa Pagitsas, director of the Fannie Mae Multifamily Green Initiative. “Our reduced interest rate for properties with a green building certification is the only one of its kind for multifamily properties in the US. It shows Fannie Mae’s commitment to making the triple bottom line tangible. The Station House is a great example: It is a financially stable property, provides quality housing that is more affordable, and has a lower impact on the environment. It’s a clear win-win-win for Fannie Mae, our lenders, our borrowers, their tenants, and the bond investor market.” As of September 2014, Fannie Mae has securitized more than $140 million in Green MBS backed by Fannie Mae’s Green Financing loans.

The Station House property’s former use and key location adjacent to the Maplewood train station are an important part of the revitalization of the community. “These types of projects invest in the local community while providing quality housing. These projects make our mission and purpose tangible,” adds Pagitsas.

Wells Fargo, one of Fannie Mae’s 25 Multifamily lenders, recommended its borrower, PREI, take advantage of the new Green Building Certification Pricing Break. “Our lender network plays an important role in communicating our Green Financing options to the thousands of multifamily borrowers in the United States,” says Bob Simpson, vice president of the Fannie Mae Multifamily Affordable, Green and Small Loans Business. “We are thrilled that Wells Fargo recognized the availability of our Green Financing option to benefit PREI.”

In addition to providing loans to multifamily owners with incentives for the owner to reduce the property’s energy and water consumption, the Green Initiative delivers analytical tools for multifamily owners, and conducts research centering on the relationship between financial performance and sustainability. “We provide innovative thinking beyond just financing,” Pagitsas adds, “to create real long-term value for our borrowers.” She cites Fannie Mae’s multiyear collaboration with the Environmental Protection Agency (EPA) on something previously missing in the market—an ENERGY STAR^® score for existing multifamily properties.

To further the relationship between financial performance and sustainability, Fannie Mae has its multifamily borrowers report their property’s ENERGY STAR^® score to their lender and Fannie Mae annually if the property is located in a city with an energy benchmarking law or if the property was financed with one of Fannie Mae’s Green Financing loans.

“We are looking at how the financial performance of a property relates to its energy performance over time,” says Pagitsas. “With this data, tracked over time, we can share with the industry the value of energy efficiency.” With this information, Fannie Mae aims to provide both the real estate and green building industries the answers to some key questions about the relationship between financial performance, energy performance, and green building certified properties.

“That is the big picture,” she adds. “We provide financing, we hit the triple bottom line, but the end goal is to have the financial and energy metrics that tell the story in a language that finance professionals, green building professionals, and policy professionals understand to make smart business decisions around real estate and green building.”

The interest rate reduction for Green Building Certified properties is just one option in Fannie Mae’s growing Green Financing offerings. While the pricing break for a Green Building Certification benefits owners who have already made an investment in greening the property—and don’t need additional dollars going forward—a new mortgage loan product feature called Green Rewards just launched this spring assists owners wanting to make a green investment. Green Rewards offers the same 10 basis point pricing break, as well as additional loan dollars to finance needed energy- and water-saving property improvements at an existing property.

Since their launch, Fannie Mae’s Green Financing pipeline has grown, says Pagitsas. “We are looking forward to announcing the next deal soon.”

The growing interest, she adds, is noteworthy for its diversity. There is demand from all types and sizes of borrowers and multifamily property owners located from the coasts to the Midwest. “It tells me that this is a growing market,” Pagitsas says. “And the end result is better quality housing for all.”

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The residual effect of the recession has exposed the flaws in our current economic models. Domestically, the building design and construction industry has been disrupted, and as various sectors have struggled for recovery, many are taking a closer look at the broader notion of a “green economy,” one that simultaneously promotes environmental responsibility and economic growth.

The potential of the green economy is staggering. According to a recent study by the Rockefeller Foundation and DB Climate Change Advisors, the United States is at the cusp of a $280 billion investment opportunity over the next decade—an opportunity that could yield more than $1 trillion in energy savings. If maximized, retrofits and building upgrades could generate over 3 million jobs and save the atmosphere from 600 million metric tons of carbon emissions per year.

An environmentally conscious investment opportunity that could create jobs and lower energy demand should be a winning proposition. However, there is an impediment to fully unlocking the potential of the green economy: the initial outlay of investment capital.

“It takes funds to invest in capital improvements,” says David Gabrielson. “In this prolonged economic recovery, neither homeowners nor facility managers have a tremendous amount of money available for deep energy upgrades.”

Gabrielson is the executive director of PACENow, a nonprofit organization dedicated to proliferating the green economy through an innovative financing model known as Property Assessed Clean Energy—or PACE. The model enables owners of residential, commercial, and industrial properties to obtain low-cost, long-term property improvement loans for renewable energy and energy efficiency with little or no upfront cost.

The idea seems simple enough and the benefits are enormous for both the property owner and local community. PACE programs can enhance the value and efficiency of existing buildings, save substantial amounts in utility costs, and promote green job creation within the building design and construction industry.

“PACE started out as this idea in California in 2008,” recalls Gabrielson. “State-by-state legislation followed. Within two years, half of the states had PACE-enabling legislation.” According to Gabrielson, the idea of PACE went viral around the country in the residential sector. In fact, PACE was named one of Harvard Business Review’s 10 breakthrough ideas of 2010 and Scientific American’s top 20 ideas that can change the world.

Then, the innovative financing model started to lose its luster under the scrutiny of lenders.

First conceived in the residential sector as a lien on the property, a conflict emerged about whether a PACE security interest should be considered a property tax (since it is associated with a property, not an individual) or a loan (since the lien pays back a fixed amount of funding). If considered a tax, a PACE lien would be repaid before a mortgage in the event of foreclosure—something Fannie Mae and Freddie Mac found unacceptable. Due to opposition from the Federal Housing Finance Agency (FHFA), which saw PACE programs as a threat to the unsteady housing market, most residential PACE initiatives quickly dried up.

It seemed as though emerging PACE programs would be dead on arrival, but in several states PACE was already evolving in response to regional market pressures and an expanded definition of what constitutes energy-related improvements. In Florida, for example, the scope of PACE-eligible improvements was adjusted to encompass retrofits for “hurricane hardening” that would increase the resilience of a structure. In drought-stricken California, the energy implications of water usage were leveraged to considerably expand PACE eligibility.

Today, the Golden State benefits from a competitive marketplace of about a dozen different PACE providers. For instance, the Sonoma County Energy Independence Program (SCEIP) provides financing for over 90 different improvements across both the residential and commercial sectors. In fact, PACE is witnessing a burgeoning force for nonresidential properties. Gabrielson points to the renovation of the DusitD2 Constance Pasadena as just one of several recent success stories in California. The hotel used a $6.8 million PACE bond to finance a comprehensive energy upgrade that included new heating and air-conditioning equipment, LED lighting, a water system overhaul, and insulation. These upgrades will help the property reduce its electricity consumption by over 200,000 kWh and water use by over 3 million gallons annually.

The Michigan adopted a PACE statute in December 2010. It allows financing for a wide range of energy and water performance upgrades on commercial, industrial, multifamily, and private nonprofit buildings. The statute also paved the way for Lean & Green Michigan, a statewide PACE program that any municipality or county can join for free. “It is an open market program, meaning building owners can work with any clean energy contractor and any PACE lender they wish,” explains Andrew Levin, president of Lean & Green Michigan. “So far, 17 local governments representing 48 percent of Michigan’s population have joined Lean & Green Michigan, making it one of the largest statewide open market PACE programs in the country.”

Lean & Green Michigan has announced its first group of PACE-financed projects and is currently considering or processing projects worth more than $50 million. Among them, the Michigan Public Services Commission (MPSC) and property owner Saginaw Plaza Ltd. have teamed up with Levin through his consultancy firm, Levin Energy Partners, and contractor Ameresco to complete the first PACE project for a state agency in the United States—a retrofit of the MPSC headquarters in Delta Township, near the state capitol, Lansing.

As Michigan’s regulator of energy utilities, energy efficiency is important to MPSC. However, its headquarters is located in a privately owned building. This exemplifies what Levin calls the “split incentive” problem common in many types of commercial buildings where the best interests of the tenants (i.e., lowering utility costs rather than building improvements) are at odds with those of the property owner (i.e., improving the building rather than lowering utility costs). The nature of PACE in Michigan is designed to address this issue. “As a property tax payment in Michigan, PACE allows the building owner to share the costs with the tenants, who are already reaping the benefits. It’s a win-win all the way around!” states Levin. The $488,000 investment in energy conservation measures and onsite renewable energy is projected to yield approximately $800,000 in energy savings and tax benefits over the next two decades. “Without PACE financing, the MPSC project simply would not have happened.”

Deep in the heart of Texas, lawmakers passed a landmark statute in 2013 that authorized municipalities and counties to work with private sector lenders to finance improvements using voluntarily imposed contractual assessments on the property by the owner. Simply stated—Texas figured out a way to make PACE tax neutral.

“It passed in one session—it’s like it was meant to be,” recalls Charlene Heydinger, executive director of Keeping Pace in Texas (KPT). Both the legislature and business community saw an entirely voluntary PACE model as a business opportunity. “Not only did it have bipartisan support, it was advocated for by both the Texas Association of Business and the Sierra Club.”

“The timing for a conservative legislator to focus on water and energy conservation could not have been better,” Heydinger noted. Much like California and other regions, Texas is reeling from perpetual drought conditions compounded by a growing population. She points out that Texas has seen an average of a thousand people move to the Lone Star State every day for the past four years. “The economy is rising.”

Heydinger and KPT see a prime opportunity for PACE to unleash the green economy in Texas and provide the rest of the U.S. with the framework for deploying private-sector-driven PACE programs. KPT’s first goal was advocating for PACE-enabling legislation in Texas. Now, the organization assists counties and municipalities with implementing locally administered PACE programs. In order to achieve this goal, KPT organized a group of more than a hundred stakeholders. “A state-managed PACE program was not an option in Texas,” recalls Heydinger. “Private lenders had to step up.”

The lending associations supported the pro-business statute. “The best way to address agricultural water issues is through rural communities. We needed to bring small, local banks to the table,” says Heydinger.

With roughly 1,200 municipalities scattered throughout Texas, KPT quickly realized that in order to sustain the success of PACE in Texas, issues of scalability and regional adaptation would have to be reconciled with the need for user-friendliness. “A statewide PACE program didn’t seem realistic,” recalls Heydinger. “We’ve always held that PACE programs should respond to regional issues so that lenders, contractors, and property owners would only need to learn one system.”

This confluence of concerns for uniformity, user-friendliness, regionality, and scalability prompted KPT to develop a uniform standard for private-sector-driven PACE programs—a tool kit—aptly dubbed “PACE in a Box.” It was developed over the course of nine months by more than 130 business leaders. “The private sector designed it, so the business community has a great deal of confidence in it,” says Heydinger. In March, Travis County established the first PACE program under the KPT standard. The county approved a contract to engage a 501c3 nonprofit PACE administrator.

With a next-generation PACE framework in place, the lending environment in Texas is ripe for the green economy. Yet the statewide business community still lacked a strong outlet to establish significant business opportunities for engineers, construction contractors, commercial lenders, and investors interested in eligible energy efficiency and water-conserving improvements.

The Central Texas-Balcones (CT-B) Chapter of the U.S. Green Building Council recognized the many disconnects between markets across the largest state in the contiguous U.S. and took initiative to remedy the situation. “We thought we needed a platform to bring green building professionals together,” states Scott Gerhardt, the CT-B Chapter Chair.

The CT-B Chapter hired a consultant to conduct research and develop an internet-based resource that could serve as an online marketplace where project teams could easily find green building suppliers, designer, contractors, and other service providers. “The USGBC membership body represents a diverse cross section through the industry,” says Gerhardt. “A comprehensive umbrella resource made a lot of sense.”

Gerhardt recalls an important conversation with leaders from the other three Texas chapters during a USGBC leadership conference last year. “They saw a clear need for such a resource but none of them felt they had the means for such an undertaking.” Over the past several months, all four Texas chapters came together to support the green building industry in all regions of the state through the Texas Green Building Marketplace (texasgreenbuildingmarketplace.org).

“Through the general cooperation and collaboration for the marketplace, it became apparent that different communities had different strengths,” explains Gerhardt. The marketplace is the embodiment of a business-driven platform equipped to help regional networks grow organically, much like the PACE in a Box framework.

As Gabrielson has seen firsthand through PACE programs across the country, “Simple, local models are the key ingredients for success.” Much like KPT’s PACE in a Box, the Texas Green Building Marketplace is the product of commerce-oriented initiatives and private local mechanisms that are unlocking the potential of the green economy and providing the design and construction industry with new, innovative economic models that benefit both business and the environment. Heydinger attests, “Things grow more organically in Texas. The more the merrier.”

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 a pioneer once again by becoming just the second institution in the United States to issue $250 million in so-called green bonds, an investment vehicle that’s helping carry out projects at Regency’s Leadership in Energy and Environmental Design LEED-certified shopping centers. And along the way, Regency has proved something else: Its pledge to go green is as firm as ever.

Regency had been in the business of owning, operating, and developing grocery-store-anchored shopping centers—322 at last count—for nearly half a century when it commenced a series of sustainability initiatives in November 2007. “We believe being environmentally and socially responsible is the right thing to do, and we’re committed to that—which can be really strange for a development company, right?” says Lisa Palmer, Regency’s executive vice president and chief financial officer. “But it’s important especially because we’re a development company. We impact the environment, growth in communities, traffic, whatever you look at.” At the same time, Palmer adds, the company’s leadership believed investing in sustainability would produce returns in quality.

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Her main pursuit at the moment is bringing light, literally and figuratively, to poor households in rural areas across India in the form of solar energy. Clean energy in India is not exactly an issue that is sweeping the global green community at present, so to say that Shah’s pursuit—bringing solar power to poor households in underserved areas of the country—is a progressive endeavor would be an understatement.

The U.S., home for this pioneering Indian American, is certainly a trailblazing country but solar-powered homes haven’t precisely caught on like wildfire, and most definitely not in low-income neighborhoods. Shah, however, sees solar energy as a potentially life-transforming form of power in India’s poverty-stricken communities, and is working through Frontier Markets and the Frontier Innovations Foundation to facilitate that change. Currently, it’s her life’s work, and while some may see a solar-powered rural India as a lofty notion, Shah views it as a practical pursuit.

For the poorest of the poor in India, those in bottom-of-the-pyramids (BOP) markets, solar energy is not just about cost savings and certainly not only about the environment. It’s about a basic necessity: electrical power. It’s an essential utility that, while so ubiquitous in the U.S. as to be considered an absolute necessity, if not a virtual right, is sorely limited and wholly unreliable in rural India. Shah knows; she’s spent the better part of the last six years on the ground level in rural India. “Having spent an enormous amount of time in blackouts, and actually seeing kerosene fires and seeing the damage that lack of electricity has on rural households, I believe if we’re going to be really addressing a challenge, it needs to be the energy challenge,” says Shah.

Frontier Markets has been moving full-steam ahead toward achieving this ambitious endeavor of supplying Indian residences in BOP markets with solar energy, which would address not only cost and environmental concerns but, more importantly, it would provide low-income Indian residents with the electrical power that continues to elude them. Solar energy is the most practical route, she believes.

“If you look at the alternatives for rural India, there really aren’t that many,” Shah notes. “The [electrical] grid’s not coming to rural India anytime soon. People are using kerosene as their alternative, which is disastrous. And in terms of affordability they can’t keep affording to pay for battery-based solutions, which really only covers lighting, not power. And so it kind of keeps them in this level of a vicious cycle of unproductively.”

She goes on to point out that solar as a concept has existed in India for over 25 years, and she and her team questioned why, with the country’s ample amount of sunlight, solar energy has not made “the last mile.” The grids aren’t there, but the sun is. It was a moment of clarity; they realized, Shah says, “There’s a clear need, there’s a clear demand, there’s a clear solution.”

However, Shah found that a solution was just part of the issue. She had to convince solar-wary residents that solar energy really is a viable option for them. It was just one more challenge that Shah was determined to overcome. As she explains, “While the need is there, people either don’t have access to the solution; they don’t know about it; they’re very uneducated about it; or they’ve had very bad experiences with it.” Bad experiences, indeed. When the Indian government first tried bringing solar in from Iran, it was faced with poor-quality products and no technical assistance. The experience left citizens with little more than distrust of solar.

 

“I know that you’re spending 50 cents a month on kerosene today. If I can get you to spend 25 cents a month on solar, you will immediately see your return on investment … So you quickly see the value of what you’re putting your money in.”– Ajaita Shah

 

Wariness is one obstacle; money is another. So, as Shah notes, for these residents who have little, if any, funds to spare, the proof is in the pudding. Her pitch: “I know that you’re spending 50 cents a month on kerosene today. If I can get you to spend 25 cents a month on solar, you will immediately see your return on investment or at least I’ll show you your ROI within, at the latest, three to six months. So you quickly see the value of what you’re putting your money in.”

 

As for lack of access, the answer is building retail points, which Shah has been doing, supported by the Foundation. But it’s not just a business move. “We spend a lot of time building up the fact that incorporating special service is our biggest motto, and not necessarily pushing a product but really caring about the needs of the customer.” The benefit is twofold, as the very same residents Shah is trying to sell on solar are also being wooed with the potential for income. Frontier Markets is converting them into retail points, thereby allowing them the opportunity to earn money on the solar revolution.

These retail points take two different forms: new entrepreneurs and existing business owners. Those residents who are new to retail open shops branded by Frontier Markets. These new businessmen and women are trained about clean energy and the products offered, which range from cost-effective solar lanterns and torches to home-lighting systems to street lights. Business owners with their own retail destinations stock Frontier Markets products and are instructed in the selling of solar products as well.

The best-selling items at Frontier Markets entrepreneurs’ shops and local retail stores are solar lanterns and torches, which harkens back to the impetus for Frontier Markets: safe residential lighting.
And then there is the limited but growing number of service centers designated to provide customer service and execute repairs. Customer service is one of Frontier Markets’ biggest mottos, Shah says. “We’re not necessarily pushing a product, but really caring about the needs of the customer—so we really do a lot of brand-building and a lot of it is to build trust with the rural customer.”

On all fronts, progress is being made. “People are understanding the concept; they’re understanding why they can trust us, they’re starting to think it through in their own innovative ways as to why they need power and what they are actually going to use it for.”

Frontier Markets’ partnering is proving fruitful in its goal of spreading solar energy solutions in rural India. The Government of India is being very supportive of Frontier Markets’ efforts, and in general, solar energy has become a massive initiative for the country; it’s a new part of the government agenda. “They know that electrical grid systems will not be reaching their constituents anytime soon and there are a lot of other challenges so there’s a lot of support,” Shah says. “It’s also an industry that’s booming in India. You have hundreds and thousands of manufacturers now, focusing on the solar as part of the government’s agenda. So suddenly, economies of scale is in your favor when it comes to the price point of technology.”

There’s government advocacy, but Frontier Markets’ endeavors also benefit from the global push for alternative energy. The organization has found assistance from, to name a few, the World Bank, the Clinton Initiative, and the Asian Development Bank, all of which are investing in making reliable energy available in developing countries.
Shah has achieved so much. She has been recognized around the world for her efforts. Frontier Markets, since 2009 inception, has sold 10,000 solar solutions to date and made clean-energy retailers of 125 rural residents. And she’s not done yet.

“Our fundamental desire is to really start addressing some of the base challenges that rural households face through distribution,” Shah adds. “We really want to become one of the largest solar distributors and actually have retail points at every village level in India, but we want to be able to replicate this model in other countries because I believe that if you don’t have sustainable points of service, you’re not going to ever be able to address the rural household’s needs on a regular basis.”

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