Galley Eco Capital Moves to Hub SoMa, Summer Get-Together in the Works

We’ve moved — here are the details:

We’re excited to announce that we’ve moved our offices to the Hub SoMa!

Hub SoMa is the newest Hub Bay Area venture - taking their co-working, collaboration business model into the heart of downtown San Francisco.

What’s great about the new location is that we can do more of our lab work — creatively designing green finance programs and collaborating on great ideas with the other companies focusing on social and environmental change.

Add to that the great event space we’ve gained where we can hold more workshops, talks and related events for the green finance and investment community. We can’t wait to show it to you!

In fact, we’re already psyched that it is the perfect place to to host our new Real Estate Innovation Advisory® forums (see the upcoming May Pacesetter for details on that other exciting offering!).

Summer Get-Together, Anyone?

We’ll be announcing our Summer Get-Together, happening sometime in June. We’ll have a meet-up among friends new and old, for an informal, fun time. Of course, you’re always welcome to call or stop by anytime before then.

If you want to make sure you hear about our Summer Get-Together plus upcoming green finance and investment workshops and events, make sure you’re on our newsletter list — sign up for it here and we’ll make sure you get the word.

Till then, please update our contact details in your records:

Galley Eco Capital, LLC

901 Mission Street, Suite 105

San Francisco, CA 94103

(415) 305-9512

(P.S. I’m off to Germany for the next few weeks — you might see a blog post or two if I run across any interesting green finance happenings while I’m out there (volcanoes permitting).

Auf widersehen!

Tax credits for green investing by insurers — we’ll pass

The availability of appropriate insurance coverage is a key risk issue that affects the overall value of green buildings and their financing.  Without proper coverage tailored to a green building’s technical features, green building owners might be exposed to losses on sustainability-related systems that can’t be recouped via an insurance claim.

At the end of the day, that leaves lenders and investors exposed to losses on those features, which inherently reduces their value and presents a barrier to advancing green building.  So appropriate “green” insurance coverage is key to assuring the proper financing and valuation of green buildings.

Skip Rawstron of InterWest Insurance Services of Sacramento, sent around an article detailing efforts to require the California insurance commission to study various sustainability risk issues tied to insurance coverages. The article (request it from us here) shares a laundry list of hearings that the insurance commissioner would be required to hold if the legislation passes.

The following snippets from the proposed legislation reveal the lawmakers focus on trying to attach advantages to green finance and investing as well as levy costs on those insurers continuing business as usual. Specifically the law, if passed, would:

• Require the insurance commissioner to hold hearings on the risk, costs and claims associated with green buildings.
• Require the insurance commissioner to conduct hearings regarding the health impacts on workers in green buildings, and use the information in establishing the Workers’ Compensation Claims Cost Benchmark. [our note: wow!]
  
• Offer state tax credits to insurance companies that invest in financial institutions that provide products designed to protect the environment and support renewable energy.

Now here’s the rub:

The concept of encouraging insurer investments in banks offering green products is a novel pass at trying to influence market forces in favor of both ecologically-friendly insurance and green banking products. Lots of folks have been talking about similar moves.

But despite being a big fan of incentives and novel financial mechanisms, I don’t think that using already strapped state funding sources to effectively pay insurance companies with tax credits to make those investments in banks is the way to go. Actually its surprisingly cheap.

Insurance companies are not hurting for cash in any respect, so there is no need to bribe them into green investing with tax credits. Everyone knows that tax credits are really a short-term play and we’re at a place where longer term financial mechanisms are needed to advance sustainability. And banks are not reluctant to offer green credit products due to lack of investment by insurers. They haven’t made that leap for other reasons that we’ve covered in other posts.

On top of all of that, the increasing availability of insurance products, well ahead of the banking industry, only convinces me that the insurance industry already sees green insurance products as  being both necessary and profitable.

Please email us to request the article, since Skip sent it to me personally.

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Get plugged in:

• Sign up for our list on our green finance training page, to get info on upcoming workshops, which go deeper into the green business case.
• Do you like this post? We’d love to hear your comments and suggestions.
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• Sometimes you can see what we’re doing on Twitter.
• Photo credit: NYArchitecture.

Profile: Climate Benefit Districts, powered by green finance

District-wide sustainability is hot!

As we blogged about last week, equally hot are the green finance tools and mechanisms being created to pay for it.

Mithun Architects‘ has developed the Climate Benefit District (CBD) in the State of Washington (disclosure: Galley Eco Capital works with Mithun on other projects). The definition from their own documentation is here:

A CBD is an independent taxing district and a quasi-municipal corporation. It will have its own
taxing authority and its own debt capacity independent of the city.

A CBD must be located within an urban growth area and should approximate “neighborhood”
scale, or roughly a square mile. It may include unincorporated territory that is within the city’s
urban growth boundary, but only if the unincorporated territory is less than 50% of the total area
and only after the city and county enter into an interlocal agreement. Multi-city CBDs may be
created pursuant to interlocal agreement.

While Climate Benefit Districts are not yet in action, parts of the structure are similar to other initiatives emerging across the nation, so this brief profile might be helpful to your efforts to expand your green finance toolbox.

How are Climate Benefit Districts financed?

A CBD is an independent taxing district with ability to issue general obligation, revenue or special assessment bonds.

It’s structure makes it eligible to create tax credit partnerships to take advantage of federal tax credit incentives such as: low-income housing tax credits, renewable energy tax credits, new markets tax credits, historic preservation tax credits and other federal tax credits that may be created. A CBD may also administer federal grant funds, is eligible to receive priority consideration for state grant and loan programs, and is eligible to create energy efficiency loan program.

Additionally, revenue can come from funds earmarked by the City where the CBD is located or from direct assessments within the CBD. The CBD chooses those assessments from a menu of “local option revenue tools”:

• Climate benefit services charges (similar to fire benefit charges, based on measurable benefits from CBD projects and services)
• A parking tax on commercial parking facilities
• A vehicle license fee
• The local option revenues available to transportation benefit districts
• Special assessments for the financing of local improvement district (LID) improvements.
• Voter approved excess property taxes for the repayment of bonds issued to finance climate benefit projects.

How is performance measured?

Performance measurement is a key strength of the Climate Benefit District. Each district’s sustainability plan would include “climate benefit targets” for:

• utility infrastructure and service;
• vehicle miles traveled reduction strategy;
• land use, green building and energy efficiency; and
• neighborhood social sustainability programs and services.

Opportunities & Challenges

One advantage within the mechanism is that the financing platform is based purely upon the coordination of existing financial products, allowing the municipal sponsor to “look under the hood” and quickly understand the proposed business plan.

But a challenge might lie within understanding ‘how much additional assessment buys how much additional value?‘ One of the primary arguments for climate benefit districts are that property within such districts would be worth more to those property owners.

We definitely agree from our own work that mixed-use projects usually achieve a sales premium to competing existing projects within their local market. There is also strong industry evidence that tenants typically prefer green buildings. Extending those facts to an entire district makes us think that this assertion of higher property value is very plausible.

But at what cost? And who pays?

Remember that this mechanism is based upon compulsory district-wide assessments based upon proportional benefit creation, as opposed to the voluntary opt-in by owners within energy efficiency financing districts here in California. That means that you are required to pay your calculated share of the additional costs if you live or do business there.

So we wonder how this mechanism works for the parts of town, where low-to moderate income residents and small businesses are too cash constrained to pay the special assessment for a district-wide sustainability program.

Will the City step in to subsidize improvements in order to allow those lower income residents and small businesses the same district-wide sustainability benefits?

Nonetheless, the Climate Benefit District offers deep green performance measurement, coupled with practical ideas that should stimulate thinking for many practitioners and communities needing district-wide solutions.

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Things you might want to know:

• Do you like this post? We’d love to hear your comments and suggestions.
• You can contact us to discuss or initiate a project here.
• You can get Our Green Journey by email or via RSS.
• Sometimes you can see what we’re doing on Twitter.
• Photo credit: Noel Powell on istockphoto.com

Social Investors Join Cities to Finance Neighborhood Green Initiatives

Municipal financing authorities are teaming up with mission-driven investors to create bond programs, which pay for green building initiatives.

Typically, the cities issue the bonds in order to help pay for upgrades to homes and buildings, which will make them more energy efficient.

Socially responsible investors are buying these bonds because they pay fixed returns while simultaneously funding the investors’ real estate sustainability goals.

Case in point:

The New Mexico Mortgage Finance Authority and  Community Capital Management have created one of the latest of these financing programs, also designated for funding neighborhood scale green initiatives. The article highlights the use of the Home Energy Rating System in order to determine the kinds of energy efficiency improvements which will result in upgraded homes qualifying for Energy Star ratings.

What’s interesting here is that the article reflects how local governments are able to be significant green finance players by combining stimulus funding available to them with innovative fixed income financing programs — backed by the powerful SRI market, which has not been as affected by the economic downturn as  many traditional private market capital providers.

The benefits? As one investor put it:

“When urban areas have good schools, job opportunities, an adequate supply of housing, safe and reliable transportation, and low crime rates, they become attractive places for families to live and businesses to set up shop. Robust communities reduce the pressure on the environment associated with sprawl.”

Be on the lookout for more growth in this form of capital to pay for the of our neighborhoods. Over the next few years, it will be interesting to follow these financing initiatives to see which programs and cities do the best job of achieving the energy efficiency increase and carbon emissions reductions that they now seek.

Photo credit: Greenforall.org/Flickr