Galley Eco Capital Wins CALED Mandate

Financing and Business Model Challenges

Lisa Michelle Galley, Galley Eco Capital’s Managing Principal, has had a long career as a financial services executive and is a nationally-recognized green finance specialist. She spoke about the challenges encountered by groups such as CALED that decide to explore new financing models and products:

“Our experience with regional finance programs and products has shown some typical problems organizations encounter when they troubleshoot their initiatives, so we bring a  unique toolbox and skill set to help them identify the problems and create sustainable finance models.”

Identifying Root Causes

First, many organizations will decide that they have financing problems without knowing the root causes of why money is not flowing through their markets in the way they expect. Without identifying the root causes of the problem, they never know the true minimum requirements that any solution should deliver. As a result, fresh funding might not flow efficiently enough to resolve their financial problems. Galley Eco Capital uses performance technology tools and techniques to identify root causes to finance problems.

Systems Analysis Defines Problems Better

Then the problems should be analyzed within a dynamic system of behavior and interactions. For example, the power dynamics between price makers and price takers within a market has to be understood as part of defining the problem.

Price makers are firms from industries that have pricing dominance — they have the power to obtain their desired pricing within transactions. Healthcare companies are a great example. The markets dictate pricing to price takers, making them weaker actors in any business system. Many hotels and manufacturers find themselves in this group. To create successful regional finance initiatives, organizations have to identify the power dynamics between these groups and make sure mechanisms are in place, which will keep them in balance over time.

Galley Eco Capital applies concepts from system dynamics, analyzing business models within whole financial systems, in order to obtain deeper insights about how these issues might be brought into balance.

In the case of regional economic development, EDC’s may want to simply recruit a successful businesses from another region into their own. Without knowing the dynamics between the new firm and existing firms in their region, EDC’s may inadvertently encourage too many price takers, weakening their region with high unemployment –  price takers usually have no choice except to control profitability through firing personnel. Conversely, having too many price makers may dampen a region’s economic growth — these firms may maximize their profitability unrestrained while externalizing the social costs their actions create.

A sustainable business model will consider the dynamics and interactions between customers and transactions over time, in order to design financial programs and services that truly deliver the economic, social and environmental stability they promise.

New Tools for Financing Program and Product Development

Galley Eco Capital applies decades of experience in financial services, program and product development for investors, government agencies and lenders to assist its network of investors and collaborators. What’s unique about the consultancy and new to green finance is that the firm brings new tools for complex problem-solving and financial program development, such as systems dynamics, performance technology and innovation games to financing problems.

These kinds of tools render deeper insights into problems much more quickly, and help collaborate with clients to develop sustainable finance programs, new business models and other solutions that are better tailored to unique challenges.

For questions or comments about this story, please call Galley Eco Capital at (415) 655-6668 or email lisa@galleyecocapital.com.

National Real Estate Investor Highlights Big Barriers to Green Building Finance

I receive a steady stream of green building studies — nowadays increasingly sponsored by the mainstream real estate publications. I usually read the mainstream studies with a bit more caution since some of them seem better suited for spreading rumors than educating and offering a constructive way forward.

And there are also those studies that focus on reporting the mood of the industry in a comprehensive enough way as to be thought provoking and educational. National Real Estate Investor might have done just that with their 2007 Green Building Survey, just out and worth a deeper look. It is a “state of green building” survey, taking the pulse of thousands of developers and corporate owners in a sufficient breadth and depth to make the results more ‘real’ and therefore more credible. While NREI did not answer every burning question, I think they did a good job of illustrating some clear dichotomies between wanting to go green and actually taking on the challenge of doing so.

Green Finance Conundrum: The Money’s Everywhere But We Can’t Get Our Hands On Any Of It

Here are a couple of nuggets for Green Journey readers that highlight the present day contradictions in financing green properties:

“Among developer respondents, only 18% have found favorable loan terms for green projects.”

The lack of adequate banking products, which respond to the higher quality and performance of green buildings is clearly evident. By the way, only 20% of corporate owners found favorable loan terms for their green projects.

The Green Journey Perspective: NREI could have done a great service to the industry here by exploring in depth the favorable terms obtained by developers and corporate owners. What made them favorable? Lower pricing? More proceeds? And who is offering them?

“A large majority have not taken advantage of any government incentive for green building.”

I have known this anecdotally from my own finance practice and NREI confirms the same observation nationally. 77% of the study respondents indicated that they had not taken advantage of any sort of government incentive. One respondent highlighted the confusion when he stated that “there are different types of incentives at the federal, state and local levels and that they are hard to keep track of”.

The so called confusion is part of the early process of  market restructuring. Governments and municipalities, having an interest in enforcing energy security and community sustainability, are politely pressing their way forward to their seat at the capital table. Private investors, lenders and other traditional stakeholders are not used to this and haven’t yet learned to fold in the government’s money into their analysis. However, if the current political and legal trends continue, they will.