Organized as part of the 2020 Higher Education Climate Leadership Summit convened by Second Nature and the Intentional Endowments Network, the Equitable and Clean Economy Opportunity Zone Workshop brought together university, nonprofit and business representatives to advance investments in and around universities by leveraging Opportunity Zones. About 30 individuals participated in this interactive and action-oriented workshop, half of whom were university representatives ranging from Trustees, Chief Financial Officers, to Faculty.
There are almost 4000 US colleges and universities and about approximately 1440 are located inside or within one mile of an Opportunity Zone and nearly 50 percent of HBCUs are located in these areas. This workshop explored how higher ed institutions can leverage the new federal Opportunity Zones program to produce a significant increase in equitable clean economy investment that reduces resident energy costs, increases local resilience, and creates quality jobs.
Examples of equitable clean economy investments that were highlighted in the case studies include (1) affordable housing, (2) brownfields redevelopment, (4) development on brown water (water runoff and sewage treatment ponds) (3) dead mall redevelopment, (4) vacant buildings and land development, (5) broadband access (which is increasingly essential to enabling smart city improvements and microgrids), (6) providing additional capital to clean energy developers, and (7) creating new clean energy businesses owned by residents of Opportunity Zones including women and people of color.
University representatives learned about innovative project financing models and exchanged ideas on scaling their own campus and community development projects in a way that considers the long term environmental and social impacts of their activities. Facilitated by Graham Richard, presenters were asked to give an overview of their active investments to stimulate discussion. Some investments that were shared during the discussion include:
Memphis Historic Clayborn Campus Development
Ruben Hernandez, Co-Founder/Managing Partner Devlabs Ventures, opened the workshop with a presentation on the team effort in Memphis, TN to develop the Historic Clayborn Temple campus in an Opportunity Zone. This is a collaborative process with a plan for raising $60 million as part of a 6-year economic development strategy that includes investments in real estate development, renovation, small businesses and technology enterprises. Ruben is working with LeMoyne-Owens College, The Historic Clayborn Temple, Investors and community leaders to create ownership stakes in land, real estate and operating businesses for local black community and the descendants of the sanitation strike workers of 1968. The capital stack and additional information is included in the slide deck attached.
Roxbury Community College and University of Puerto Rico Initiatives
Gregory King, Managing Director TSK Energy Solutions, shared his work with Roxbury Community College and University of Puerto Rico. The Roxbury Community College Renewable Energy Project is located in an Opportunity Zone and is part of a $72 million campus-wide renovation project. The 20.1 million energy project included 23 unique energy saving initiatives including 115 geothermal gells, LED lighting upgrades, and a large solar canopy installation. The University of Puerto Rico (95% of Puerto Rico is in an Opportunity Zone) is in the process of seeking investments in local solar, microgrids and renewable natural gas. Greg discussed the potential for Opportunity Zone funding to accelerate clean energy development.
The Trades District City of Bloomington, IN working with Indiana University
Mayor John Hamilton shared his vision for The Power of Three. 1. Opportunity Zones. 2. Cities with Strategies &Tools. 3. Universities with Strategies &Tools. Mayor Hamilton explained the collaborative investments in the Tech District from Community Development Financial Institutions (CDFIs) and the University with the Indiana Philanthropic Venture Fund. The Mill, Inc is an innovation center with 30 companies and 274 members in just 1 year of operations. In another Opportunity Zone the city of Bloomington is seeking development plans for the IU Hospital Redevelopment Site.
Modeling Innovative Financing in Opportunity Zones in Delaware
Lisa Woods, Managing Director KPMG LLP shared the work in progress in Delaware with a community foundation to leverage investing in the 25 Opportunity Zones in Delaware. KPMG has developed a model to evaluate the options a person has with an appreciated asset. They modeled out 3 different scenarios for a nonprofit healthcare system to compare OZ costs for a development vs. traditional bond financing. The result showed they were able to proceed as an OZ project.
Solar Financing for Low Income Communities
Kyle Burgoyne, Chief of Staff, Distributed Resource Ventures presented the work of his company and the Oakland, CA based nonprofit company Grid Alternatives. From a socio-economic perspective, solar has penetrated its market form the top-down. Based on NREL data if we are to reach an Equitable Clean Economy, investments must be made in the low and moderate income (LMI) communities where almost 42% of the undeveloped residential solar capacity exists.
DRV/Grid Alternatives have been awarded a $1million grant to build a new financing platform to accelerate investing community solar and solar for low income multifamily residential property. The lack of investment has occurred because of the perceived offtaker risk within the LMI segment which has created high costs of capital or lack of participation of capital. There also has been no centralized or turnkey method for catalyzing deal flow. The DRV solution is to develop a technology platform that makes it much easier for local project developers to connect to many more types of capital including tax equity, term debt, construction loan providers, PRIs and Opportunity Zone investors.
Workshop Key Themes
In the course of our 3-hour afternoon dialogue, key themes that emerged from our discussion are as follows:
Displacement: Establishing a livable wage is an essential component of enabling development efforts to benefit community members. Without supporting a livable wage, as new development begins to gentrify a community, displacement of incumbent residents can occur, thus excluding them from the benefit of those development efforts.
Standardization: Standardized social and environmental impact metrics would add significant value to the larger conversation. Community wealth building is the most important aspect of Opportunity Zones and investors will need to be more intentional about how communities are being improved by the flow of capital.
The Shift: There needs to be a shift in the culture of investing and better align our investment practices with the broader economic and social priorities. We are already seeing a shift happening as retail investors shift their appetites away from traditional investment options to more impact target options. Opportunity Zones, with its intended purpose to strengthen local economies, can also be a starting point for these conversations. However, many communities are still combating an older mindset (the traditional bottom line mindset) when working with financiers.
Alignment: Aligning investor objectives with community benefit is critical for these development projects to be successful. Two ways of establishing better alignment include (i) the eventual long-term ownership of the developed assets by the community and (ii) allowing the community to set more of the terms of the investment upfront.
The Gap: There is still a tremendous need for financing solutions meant to accommodate low to moderate income communities across the country. There are significant disparities in wealth in cities like Boston which could benefit from solar projects. However, a group of projects in that community were either not economically viable or were simply undercapitalized.
Community Development Financial Institutions (CDFIs): CDFIs which lend and deliver financial services to low-income and other disadvantaged people and communities are valuable partners to engage in community development projects. They have established knowledge on community needs and investment opportunities. They are also well positioned to be part of the capital stack and participate in the raising and deploying of capital.
Other Incentives: The Federal Opportunity Zone Incentive is not considered to be an especially opportunistic incentive by everyone. The complexity of this incentive creates many barriers to its implementation including; the need for highly technical legal and CPA professionals (increasing transaction soft costs), the possible misalignment of Opportunity Zone investments to the intended beneficiaries of the investment, and a less than well understood means of participation by many stakeholders. In addition, the incentive is not considered to be a "game changer" for many projects, instead it is considered more of the "icing on the cake". The barriers of implementation in conjunction with a lack of high upside may steer developers and financiers toward other means of "closing the gap" for project viability in their pipelines such as Mission Related Investments (MRIs), Program Related Investments (PRIs), or loan guarantees.
Aron Betru, Managing Director, Center for Financial Markets, Milken Institute, Center for Financial Markets
Kevin Brooks, Director of Community Engagement and Alumni Relations, LeMoyne-Owen College
Carlton Brown, Senior Fellow, Association of Governing Boards Consulting
Kyle Burgoyne, Chief of Staff, Distributed Resource Ventures
Felicia Davis, Sustainability Director, Clark Atlanta University
Sidney Evans, Vice President for Finance and Management, Morgan State University
Corey Farmer, Sustainability Coordinator, University of Florida
Judith Fitzgerald, Trustee, Lincoln University
Richard Gragg, President, National Technical Association; Associate Professor of Environmental Science and Policy, Florida A&M University
Scott Haase, Laboratory Program Manager, Federal, State and Local Partnerships, National Renewable Energy Laboratory
Lisa Hall, Fair Finance Lead, Beeck Center for Social Impact and Innovation
John Hamilton, Mayor, City of Bloomington, Indiana
Ruben Hernandez, Managing Partner, Devlabs Ventures
Dimitrius Hutcherson, Vice Chair, Board of Trustees; Chair, Investment Committee, Lincoln University of Pennsylvania
Kaede Kawauchi, Program Manager, Intentional Endowments Network
Gregory King, Managing Director, TSK Energy Solutions LLC
Premdat Kokilepersaud, Director - Physical Plant, Morgan State University
Henry Lancaster II, Trustee, Lincoln University; Consultant, HBCU Green Fund
Matthew McGuire, Consultant
Jeanne Milliken Bonds, Professor of the Practice, Impact Investment and Sustainable Finance, UNC Kenan-Flagler Business School – flight delayed and could not attend
Olugbemiga Olatidoye, Professor, Clark Atlanta University
Carl Patten, COO, Interdenominational Theological Center
Kalyna Procyk, Sustainability Coordinator/ Adjunct Professor, Muhlenberg College
Patricia Reiter, Exec. Director, Arizona State University
Graham Richard, Managing Partner, Graham Richard Associates LLC; former Mayor, Fort Wayne, IN
Rebecca Richardson, Director of Project Development, Opportunity Virginia
Alan Robertson, Vice President for Finance and Administration, Florida A&M University
Fatemeh Shafiei, Associate Professor and Chair, Department of Political Science, Director, Environmental Studies, Spelman College
Angela Sutton, Director of Environmental Health and Safety, Florida A&M University
Anasa Troutman, CEO, Historic Clayborn Temple
Lisa Woods, Managing Director, KPMG LLP
Thank you to our supporters for making this event possible: