University of Michigan students created a revolving loan fund to improve energy efficiency in their city. They share tips for success.
Sometimes the stars align and a project benefits all partners, offers an innovative solution to a real world problem, and provides a tangible benefit to the community.
Such was the case in early 2014, when University of Michigan students partnered with the City of Ann Arbor and used university funding from the Dow Sustainability Distinguished Award Program to create a revolving loan fund to improve energy efficiency in the city.
Below, those involved describe the project and the factors enabling its success, as well as general tips for Centres hoping to expand their capacity in creating unique, impactful, multidisciplinary and cross-organizational projects.
Discovering Common Ground
Students initiating the project were Dow Sustainability Fellows. The Fellows program supports graduate students and postdocs across the University of Michigan. Participants are expected to collaborate with other students and organizations and “research something that might not have otherwise been explored,” explains Dow Sustainability Fellow Emily Taylor, who was involved in the project. Taylor is also affiliated with the Erb Institute, the University of Michigan’s business and sustainability centre.
During discussions with other Sustainability Fellows, the idea sprouted for a revolving loan fund. “Ann Arbor has a huge number of rental properties,” says Taylor, and “we discovered that numerous renters don’t know what to do or who to ask to improve efficiencies in their rentals, while landlords are reluctant to invest in what is perceived to be an unknown investment return horizon. We thought with this project we could reduce the barrier to investments and provide the investment capital to do so.”
The City was a natural partner, adds Dominique Abed, communications and brand manager at the Erb Institute. “Compared to most municipalities, Ann Arbor is well ahead of the curve on water management and climate change mitigation.”
Designing an Effective Fund
The Revolving Loan Fund addresses the split-incentive problem. Renters have no incentive to pay for energy efficiencies if landlords pay for heat and energy, while landlords have no incentive to pay for upgrades if tenants pay for heat and energy. The resulting lack of action is particularly noticeable in smaller unit rental properties, which typically house students. Ann Arborites spend more than $50 million on utility bills. “Any reduction to this staggering expenditure puts money back in people’s pockets to be spent in local communities,” notes Taylor.
After developing the idea, the student researchers applied for the university’s Dow Distinguished Award and received $40,000 to implement their idea. Working with the City of Ann Arbor, they decided that City administration of the fund would best ensure its endurance.
“Effectively, landlords borrow money at low rates,” says Taylor, “and then pay back the fund over three to five years, making the money available for the next group. The savings they realize from the efficiencies make it more than worthwhile.”
Using Diverse Expertise
Project participants agree that interdisciplinarity was critical to project success. “Each student led an aspect of the project in which they had the most capability,” says Taylor. One student had experience with proposal writing; a policy student navigated codes and zoning; and an architecture student helped produce an energy guidebook that visually illustrated the different behaviours renters could adopt.
In addition to diversity among the students, adds Abed, “other project members — including municipal and academic partners — also provided valuable skills, backgrounds, resources and influence.”
Building Innovation through Interdisciplinary Partnerships
The Revolving Loan Fund project had advantages: clear alignment of purpose between the parties involved and tangible benefits for all. What can you do if you face a more challenging collaboration or have fewer resources?
Terry Nelidov, Managing Director at Erb, points towards tools and methodologies that can help overcome obstacles in any collaborative project, including those that cross companies, industries, sectors and governments. He recommends stakeholder engagement principles, group facilitation,Future Search and other community-visioning approaches.
“Projects like this are always easier if they’re with just one company,” adds Nelidov, “but they also have the potential to be much more impactful if they cross industries or sectors.”
The team behind the Revolving Loan project hopes that other cities will replicate the model, implementing similar funds and innovations.
Taylor sees innovation possibilities for any diverse team of participants. “It’s about making an efforts to not do just what we already knew how to do,” she explains. “We wanted to learn something new, something that we weren’t as comfortable with or didn’t have expertise in. Through this group, we were able to develop skills and expand in new areas.” Ultimately, she adds, “we were most effective because of these different areas of expertise.”
Watch a video on the Revolving Loan Fund. Visit the Erb Institute for more information.
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