Toronto Atmospheric Fund launches financing company for energy efficiency
May 21, 2015 - Toronto Atmospheric Fund (TAF) has launched Efficiency Capital Corp., a for-profit social enterprise dedicated to financing energy efficiency retrofits of large buildings. The company allows building owners to undertake retrofits without taking on debt, and then guarantees the energy savings through a specialized insurance product.
TAF said it developed the approach, called the Energy Savings Performance Agreement (ESPA), to overcome barriers faced by this market. It was used for the retrofits of Harbourfront Centre, the YMCA of Greater Toronto, and social housing buildings in Toronto. The organization then exclusively licensed the financing tool to Efficiency Capital, so that the ESPA could be offered more broadly, TAF said.
Building owners make little to no capital outlay and, during the ESPA contract term, repay Efficiency Capital a percentage of the utility savings, and keep the balance, according to TAF.
TAF, a non-profit endowment, is mandated to develop urban solutions to address greenhouse gas (GHG) emissions and air pollution through grant-making, impact investments and community collaboration. Having incubated the company, TAF said it will invest up to $2 million of its own funds as subordinated debt, which Efficiency Capital will deploy in ESPA transactions.
Buildings are the largest source of GHG emissions in Toronto (50%), TAF reported, and multi-measure retrofits—efficient heating and cooling equipment, motors, lighting and water fixtures, insulation, and ongoing monitoring—can reduce energy and water use by at least 30% in most buildings.
“It’s rare that you get an opportunity to actually make money and make the world a better place all at the same time,” says Efficiency Capital’s president Mike Vinokur. “To win the use of TAF’s ESPA we had to promise that, notwithstanding being a for-profit organization, we will also advance the GHG-reduction mandate. They were very clear: it’s not one or the other, it’s both.”
Efficiency Capital said it aims to invest at least $100 million over the next few years.
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