Energy Savings Performance Agreement - Tim Stoate, Vice President, Impact Investing - Share

Energy Savings Performance Agreement
                 Tim Stoate, Vice President, Impact Investing

                                                February 2014

About TAF

Toronto City Council created the
Toronto Atmospheric Fund (TAF)
in 1991

First municipal climate agency in
the world

$23 million endowment for
grants & mandate-related
investments

Independent (arm’s length)

Mandate

Support local initiatives that significantly reduce greenhouse
gas and air pollution

Toronto’s GHG reduction targets are

 30% reduction by 2020 and
 80% by 2050

Why is TAF investing in energy efficiency?

Almost 60% of GHG emissions are from buildings. TAF seeks
to accelerate energy efficiency in the high-rise residential
market by reducing financial regulatory and other barriers.

More than 6500 buildings in GTA

The low hanging fruit myth

Energy efficiency barriers

“What is the main barriers to pursuing
energy efficiency at your organization?”

• Lack of funding to pay for
  improvements (37%)
• Insufficient Payback ROI (21%)
• Uncertainty regarding
  savings/performance (11%)

                                                 6

Energy Savings Performance Agreement

 The ESPA is a new financing structure
 Essentially a service agreement
 It’s not a loan
 TAF will pay directly for a suite of energy efficiency
  measures
 Energy savings shared and insured
 Transaction minimum $250,000

ESPA vs. Loan

ESPA                                      Loan
TAF pays up to 100% - building’s capital Building’s ability to attract capital
protected                                reduced
Non-debt and no lien on property          Liability on balance sheet
Transfers much of the risk of             Responsible for technology changes
ownership, technology changes and         and equipment performance
performance to TAF
Building never pays more than savings     Building can pay more than savings
ROI to building virtually unlimited       ROI could be lower but can’t be higher
Borrowing by-law not required             Borrowing by-law required
Option to pre-pay after 3 years           Pre-payment not always an option

Features and benefits

 Quality. Retrofit plan optimized for savings by TAF and
  insurer
 Commissioning and re-commissioning required to
  ensure that new equipment is installed and operating
  correctly
 Aligns stakeholders (building owners, investors, insurer,
  engineers)

Return from savings

                                  Savings used to Pay Building Owner
                   Pre- Project
                   Energy Costs
                                  Savings used to Pay TAF
Energy Costs ($)

                                  Post-Project Energy Costs

                                             Financing Term

                                                  Time

                                                                       10

Too good to be true?

 Energy audit is the responsibility of building owner -
  incentives pay for a portion (up to 50%)

 TAF earns a return!

 Pre-payment has “make-whole clause” – TAF has to
  make a minimum return

Harbourfront Centre

$117,000 in financing
9 energy efficiency measures
$54,000 annual energy savings
80% to TAF, 20% to Harbourfront
200 tonnes/yr of CO2 reduced

Robert Cooke Co-Operatives Homes

$485,000 in financing
7 energy efficiency measures
$70,000 annual energy savings
90% to TAF, 10% to Building
170 tonnes/yr of CO2 reduced

Thank You

            Tim Stoate
  Vice President, Impact Investing
tstoate@tafund.org    416-393-6368

       Toronto.ca/TAF

Looking for Honey in Other
                        Pots
Financing social economy projects,
                      the Québec
                       Experience
       Regeneration forum, Toronto, Feb 11th 2014

                         15

Le Chantier de l’économie sociale

 Chantier de l’économie sociale: networks of collective
  enterprises, local and regional development
  organisations and social movements to promote and
  develop the social economy

 Recognition by Quebec government as a participant in
  economic and social development

                                           16

Challenges

   Many institutional barriers
   Acces to capital
   Undestanding of social economy
   Commercialization strategies
   Image of the social economy

                                     17

A first answer
Réseau d’investissement social du Québec:
A 12M$ fund
Contribution from:
 Québec governement
 Private entrprises:
     Alcan
     Groupe Jean-Coutu
     Imasco
     Caisse Desjardins
     Banque Nationale, de Montréal et Royal

                                               18

A quick snapshot
Réseau d’investissement social du Québec:
• Technical assistance and capitalization components
        484 projects
        $11 million investment
        Creation and maintenance of more than 6,000 jobs
        Recreation and tourism, services, recovery-recycling,
         solidarity commerce, culture, etc.

                                                 19

Fiducie de Chantier de l’économie sociale
  CES Trust
  Contribution from:
   Development Agency of Canada for the Regions of
     Quebec : 22.8 M$
   Fonds de solidarité FTQ: 12,0 M$
   Fondaction CSN: 8,0 M$
   Québec governement: 10,0 M$
                                      Total :   52,8 M$

                                           20

Fiducie de Chantier de l’économie sociale

   Operations Patient Capital

   Real Estate Patient Capital:

                                   21

Fiducie de Chantier de l’économie sociale

  Patient capital
    Repayment in a single instalment after 15
     years
    Monthly paymnet of interst and fees
    No security or any other guarantee
  Real estate patient capital
    Mortgage financing with a financial
     institution
    Guatentee by real estate mortgage
     subordinated

                                      22

Fiducie de Chantier de l’économie sociale
 Patient capital

  32% in operating patient capital
  39% Real estate patient capital
  29% mix of both

                                  23

Housing Challenges

 Need for community Housing
 Response against « social bonds »
 Response to the diminution of gouvernement
  program
 Beeing a actor in financing

                                   24

A limited partnership fund

 With the actors of community Housing
 In adition to governement program
 Pilot of 1 200 units :
   2013: 200 unités
   2014: 500 unités
   2015: 500 unités

                  31,5M$
                                   25

A limited partnership fund

 Guarentee from the governement of Québec
 Investments from union fund
   Fonds de solidarité de la Fédération des
    travailleurs du Québec (FTQ)
   Fondaction, Confédération des syndicats nationaux
    (CSN)

                                       26

A limited partnership fund

 Integrated in the developpement program
  AccèsLogis
   Patient capital 15 years
   Mortgage from a partner institution (SSQ a mutual
    insurance group)

                                        27

 3 funds:
      Réseau de l’investissement social du Québec (RISQ)
      Fiducie du Chantier de l’économie social
      Fond d’habitation – Capital patient
 3 structures:
      Non-profit organisation
      Trust
      Limited partnership

                                            28

 Many types of loans
     Risk capital
     Patient capital
     Operating capital
 Many investors
     Governements
     Private sector
     Unions

                          29

30

Looking for honey in other pots

Presentation to HSC Regeneration Forum

Derek Ballantyne

613-366-1169 info@communityforwardfund.ca
251 Bank Street, 2nd Floor, Ottawa, ON K2P 1X3
www.communityforwardfund.ca

Community Forward Fund

•   A loan and financing fund for
    Canadian nonprofits and charities
•   Targets gap in access to patient
    capital, working capital, bridge
    financing and growth capital for the
    sector
•   Builds financial capacity through
    financial reviews and coaching
    services
•   Works in partnership with regional
    funds, foundations and other
    community partners

CFF Organization Structure

                                                    Accredited Investors

                                     Investment Assets                  Annual Return

                            Mgmt Fee
 Community Forward Fund
                                                 Community Forward Fund
  Assistance Corporation
                                                    (Concentra Trust)
(Registered Fund Manager)
                            Advise
                                                                           Interest Payment
                                         Loan Principal                    Principal Repayment

                                                      Loan Recipients

Community Forward Fund

• Operating since July 2012
• Registered for investors in 5 provinces

              Lending                          Financial Capacity Building

•   $7.8 million subscriptions              • Introductory workshops
•   $2.0 million commitments                  alternative financing
•   $6.8 million loans approved             • Site analysis
     – 70 % drawn
                                            • In depth financial reviews /
•   2012 return to investors 3.2%
                                              clinic

Loan portfolio
•   Detailed loan review process
•   Two-stage credit approval process
•   Provide secured and unsecured lending
•   Lending rates 5% - 8%
•   Average loan $270,000
•   Average term 30 months

Housing loans
• $ 2,500,000
  –   Project development funding
  –   Participation in take-out lending
  –   80% secured on assets
  –   Balance secured on cash flow or GSA
• Significant demand
   – Complement to conventional lenders
   – Prepared to assess risk differently
   – Can lend when security on asset not possible

Investors

• Community Foundations / Private foundations
   – Impact investors
      • Local impact
      • Social impact
   – Return equal or above disbursement requirements
   – Third party due diligence and loan management

Sources of alternative financing

• Community loan funds
   – Relatively small, close to capacity
• Foundations
   – Challenge of diligence, loan monitoring
   – Limits related to concentration of investment class
• Community bonds
   – Primarily retail investment, RRSP drive
   – Challenge of placement mechanisms
• Structured investment / debt product

Why are good ideas not funded
• Investor needs not always met
   –   Ability to manage / cost of due diligence
   –   Viable business plan
   –   Quantum of risk exposure to asset class
   –   Liquidity of investment
• Limited number of intermediaries
   –   Sufficient capitalization for housing
   –   Can diversity investor risk
   –   Provide investor liquidity
   –   Generate on-going returns