Solar in Your Community Resources

In response to the growing interest in community solar programs and the need for innovative funding resources, Optony worked with the Department of Energy’s (DOE) Sun Shot program to provide guidance working with impact investors. You’ll find a guide to contacting and working with impact investors to fund community solar projects. You can download the guide here and read it below in a FAQ format. Additionally, you’ll find a table of 100 impact investors that are interested in community solar projects. The impact investor table is sortable by foundation name and region served: Nationwide, Western, Central North, Central South, Northeast and Southeast.

Frequently Asked Questions

Impact investment is the financing or capital injection into companies or projects with the intent to generate environmental and social returns in addition to financial gains.  Often philanthropic foundations, high net worth individuals (HNWIs), family offices, or impact investment funds will fill the role of financier and tie their expectation for financial return with metrics that track and report community benefit, environmental, or social performance metrics. Community solar programs are most likely to look for financing from philanthropic, private equity, or family office funding as opposed to pension or retirement plan sources, which typically invest in the equities, or bond markets.

Impact investment methodologies are diverse, and often change based on the goals of the investor. As such, the term impact investment can also refer to filter-based investment strategies designed to screen investments based on corporate track records for environmental compliance, ethical supply chains, or other factors designed to divest a portfolio from activities deemed as unsavory to the individual investor.  Environmental social justices, gender, climate, and corporate social responsibility screens have informed investment portfolios and resulted divestments from brands, corporations and publicly traded equities in the pension funds universities, municipalities, and in the portfolios of family offices, and HNWIs.

Determining the expectation for return of impact investors will vary by capital source, investor risk tolerance, and the ongoing variation in the performance of projects and investments already in the investor’s portfolio.  It is a common misconception that the creation of community, environmental, and social benefits comes with an expected decrease in return, and financial performance can often be correlated with the robust monitoring, tracking, and reporting of social and environmental performance or compliance.

It is notable that impact investors will often offer longer time horizons than other investor groups such as venture capitalists or hedge funds. The expected pay back or break even point for impact investors can extend towards twenty-year time horizons, as opposed to three to five-year payback periods expected by venture capitalists.  Exits, or investor expectations for cashing out are often less commonly prioritized by impact investment and philanthropic capital sources than in venture deals.

As a result of longer time horizons, the reference to “slow growth business models” is a commonly referenced investment priority in the impact investment profession. However, longer time horizons are often paired with a lower risk tolerance. This means that many projects funded by impact investors require strong internal cash flows with predictable and regular revenues and expensive.  If a project developer can show reduced risk in their cash flows either through credit enhancement achieved through partnership with public sector co-signers better costs of capital can be negotiated.

Given the longer time horizon seen on impact and philanthropic capital Treasury Bonds, often called “T-Bonds,” are regularly used as a benchmark for performance.  T-Bonds are often issued with a maturity of ten to thirty years, with a yield ranging between 2%-3% depending on their duration.

Community Solar programs can be deployed to create both environmental and social benefits that are attractive to impact investment and philanthropic capital sources. The underlying program design features of community solar programs can be sculpted to provide access to renewable energy for renters and low income or disadvantaged community members that otherwise would not have the ability to install photo voltaic systems on their roof.  In addition, these projects can offset the need for natural gas, and other fossil fuel-based electricity generation, which can directly provide air quality benefits and reduce the emissions of climate change causing greenhouse gases. Here are a few examples of solar projects funded by impact investors:

Have a registered company, LLC, sole proprietorship, or benefit corporation profits or employee owned cooperatives can also approach impact investors.

Non-profit structures may be able to attract philanthropic funding or family offices in return for the ability to use the project as a tax write off.

It is recommended that those seeking investment from impact or philanthropic sources:

  • Quantify social and environmental impact in terms of money saved for their customers, avoided emissions, and improved air quality, as well as pro-forma cash flow statements showing profit and loss.
  • Define asks ahead of any meetings and define the needed capital. Clearly define what the investment is needed for answering: is it to purchase equipment? To pay staff? To promote your program to your customers through marketing? Each may require sharing specific business plans to supplement proposal and financial requests and support underlying claims about the programs design and its implementation.
  • Come prepared with a 1-page executive summary capturing key program design features, your addressable market (customers), your team and partners, and key financial returns, capital ask, and expected environmental or community benefits. Have a brief slide deck as well.

 

  • Expect monitoring of a different and longer list of performance metrics than seen from different capital sources. Claims about emission savings, job creation, or the promotion of economic development should be defensible through an audit. Expect to have to go through verification and measurement and verification processes imposed by impact investors.
  • Use your investor as a network to find mission aligned partners and suppliers.

100 Impact Investors