Revolving Loan Funds

“A goal without a plan is just a wish.” Antoine de Saint-Exupery 

Adding to this, direction without a budget is just a wish. It is a fact that it takes resources to get things done and that money is a critical resource. 

One of the best ways to build a significant sustainability budget is building and effectively managing a revolving loan fund. Revolving loan funds are budgets that allow teams to capture savings and redeploy these savings into new projects. 

Most organizations are familiar with revolving loan funds even if they don’t already have one. It’s just a fancy way to say, “reinvestment.” From my experience, these funds are anemic and underutilized. The obstacle is typically a lack of clear definition, funding terms, and, most critically, goals. Taking the time to resolve these issues can help you build a significant funding pool to execute your most important work.

Definition

Most revolving loan funds are tied to some aspect of utilities or operations. They might back into this through “environmental” sustainability or carbon mitigation since utilities and fuel consumption tend to be the bulk of most organizations’ carbon footprints. To this end, it is important to delineate the revolving loan fund from other, normal spending. 

These buckets tend to be:

• Utility Spend – your typical, annual utility expenses
  • Electricity
  • Natural Gas
  • Water, Sewer, Stormwater
  • Other
• Fuel Spend – your typical, annual fuel expenses
  • Gasoline
  • Diesel
  • Other
• Operations & Maintenance (O&M) – what your organization is spending, or should be spending, on operating and maintaining associated equipment
• Repair & Replacement (R&R)
• Risk Mitigation
• Other

In many cases, revolving loan funds are intended to be additive or opportunistic. They are often used to fund projects with identified savings but not enough associated budget.

A good strategy could be looking for incremental upgrades for scheduled asset upgrades looking at the buckets above. Efficiency is the broad term. What happens if you deploy some capital for a variable speed pump? A more fuel-efficient engine? An advanced HVAC system? Solutions like these help other departments out (allies) and demonstrate your dedication to the organizational mission, beyond sustainability. 

Payback Terms

Focus on real and verifiable utility savings. One of the most frequent pitfalls is “operational savings,” which have earned sarcastic quotation marks (indistinguishable from grammatically correct quotation marks). Operational savings exist literally but rarely functionally. 

Lighting is a great example. If you switch to LEDs and your operations team changes fewer bulbs and no longer replaces drivers. They save time and, therefore, money. So the savings literally exist. Functionally, these teams have other tasks that need attention, and functionally, you’re not going to pay them less because they’re spending less time changing lightbulbs. (In many cases, they will be spending more time on higher-value outcomes, making their time more valuable!)

Dubious Terms

A common trait of revolving loan funds is dubious terms. These tend to be awkward hedges like 0% interest rates or 80% recapture caps. Beyond the actual terms, what you should be hearing is distrust. Your decision-makers either don’t trust your management of the fund or trust that they understand what is really going on under the hood. 

Either way, it’s on you to put in the time to better define the terms of your fund. Some easy ways to improve the outcomes of the fund are to:

• Commit to transparency
  • Annual, quarterly, or monthly reports
• Sort measure by one-time and recurring savings
  • Recurring measures should include a projected measure life and a plan for replacement/upgrade
• Mention operational savings but exclude them from the financial total
• Third-party measurement & verification (M&V) on large projects

Goals

Your RLF should align closely with the goals of your organization. At the very least, it should be framed in the language of your organization. It always takes me some time to understand the business model and language of the organization. The business model is just an expensive way to answer the question: How does your organization generate resources? Is it tax dollars? Grants? Paying customers? Something else? 

Your RLF should sit close to this flywheel. Ideally, it finds a way to add mass and energy to the proverbial flywheel.

Big Hairy Audacious Goals (or BHAGs) seem to be all the rage for sustainability departments. 

To name a few:

• 80 by 2050 – an 80% reduction in total carbon footprint by 2050
• 2022/2032
• 100% Renewable
• Various iterations of net-zero
  • Net Zero Carbon
  • Net Zero Energy
  • Net Zero Water

I’m going to follow the “shit sandwich” technique to dig into Big Hairy Audacious Goals. For those of you that don’t know, a shit sandwich is a feedback technique that involves something positive (bread), negative feedback (shit), and some more positive feedback (bread). 

Organizational or institutional goals are critical, and they can be challenging to arrive at. Having a stated goal as an organization requires some combination of leadership, consensus, and alignment. It is a considerable investment to pursue a BHAG and requires confidence and commitment to publish your goals.

Unfortunately, the current crop of sustainability goals nationwide are partial solutions at best and dangerous distractions at worst. I am going to pick on my home community, Park City, UT. I was part of setting two goals and laying the groundwork for a third. The first two goals were adopted simultaneously, 2022/2032 Net Zero, where the municipal operations achieve net-zero carbon by 2022, and the whole community achieves net zero carbon by 2032. The third goal is 100% renewable, which was adopted shortly after I left. These are aggressive and admirable goals. They are frequently cited as the most aggressive municipal goals in North America (if not the Western world) if you ignore scope, scale, and impact. On the surface, these are great goals. I diverge because these goals do not address Park City’s number one threat, climate adaptation.

Park City is a small mountain town dependent on winter resort tourism and major events to remain the small, wealthy community it is. The last round of climate projections identified that Park City’s highest resort altitudes would experience a 50/50 rain snow mix by 2035 and that the resort bases would be inoperable at this time. Beyond making it a mild, muddy winter, there are profound impacts on the local workforce and droves of disappointed tourists. 

Beyond environmental factors, known economic trends are impacting Park City. The snowsports industry has been losing marketshare and consumers steadily since the early 1990s. A combination of expense, other vacation opportunities, and loss of feeder resorts has meant fewer people are introduced to snowsports at the correct price point. In snowsports, most people start somewhere local. For example, I started at Grand Geneva, WI, where a day on the mountain cost maybe $75 (adjusted for 2020), including rentals, and I was taking laps on a former landfill. Ski vacations in Park City average more than $10,000 for a six-day trip so that you can imagine the gap. To further compound this dynamic, climate change has made small, feeder resorts challenging to operate, resulting in some consolidation but, more significantly, a lot of closures.

Keeping this relatively simple, we have three major factors at play in Park City:

1. Economic dependence on snow
2. A known and predictable loss of snow within 20 years
3. An existing economic model that is fundamentally failing, despite a short-term boom.

The goals we see attempting to address this problem are squarely in the camp of carbon mitigation (net-zero 2022, net-zero 2032, and 100% renewable). Carbon mitigation is hugely important, and climate change is both a meta-population problem and longitudinal. There are tens of thousands of years of consequences for our current level of carbon pollution. So, solving a +10,000 year problem doesn’t do a thing for a 20-year problem.

Long story short, the current goals are ambitious and solves a problem, but they don’t solve THE problem. You have the wrong goal if you can be 100% successful with a goal and still fail more broadly.

If these were my goals, I would keep the 2022 goal, adapt the 2032 goal to an 80% reduction, and introduce deep economic development and diversification goals. Park City needs a new economy, and local economies take time to take root, grow, and mature. As easy as these two sentences are to write, I fully acknowledge the powerful narratives, psycological hurdles, institutional obstacles that make this goal a big lift.

Park City should feel good about a few things. First, it is resource-rich. Second, it is small (which should mean nimble). Third, it has made some great gains through robust event schedules, summertime activities, and economic diversification.

“Those who cannot remember the past are condemned to repeat it.” George Santayana 

There is a lot of truth in the well-worn quote and I also think that there is a trap in this thinking.

What you probably hear is: We can’t try X, we tried that Y years ago and it was a total failure. Half of this statement is true, it probably was a failure. If you tried it again, would all of the conditions that led to failure repeat themselves? Why are we so good at recognizing loss or failures? 

History

History is a rich resource for understanding our species, our patterns, and the obstacles we have created for ourselves. History is great for studying failures, philosophies, finding inspiration, and overcoming some important cultural narratives. 

History is a poor yardstick for the future. There are a lot of factors that make our present, and future, very different from the past. Technology has thrust us into exponential times. Peter Diamandis has droves of interesting thoughts, articles, and books about this very topic. 

Climate change is the other half of the equation that negates many historical narratives. The present isn’t like the recent past, much less regional histories. We lean on our shakey memories of last winter, our grandma’s garden, summers at the lake, and use these memories for decisions about the present. For generations, this has been an effective crutch. Building a building for the historical climate and conditions was okay. Designing a business dependent on seasonal supply chains or stable regional populations was sound. We can’t count on the past the way that we could. 

We all have to practice thinking further out, and ironically, sometimes the best way to build that muscle is looking back.

Starting Over

The English language is full of idioms about starting over. Get back on the horse. Turn over a new leaf. On the wagon. Make a fresh start. Start from scratch. 

We’ve all started over, in our lives, sometimes from the beginning. Whether it was a document that failed to save, a relationship that didn’t work out, a career that wasn’t a fit, or maybe a dish you left in the oven.

Yet, there is a lot of resistance to trying sustainability projects again. I have heard we tried that before for:

• Solar PV
• Energy Efficiency
• Water Efficiency
• Recycling
• Compost
• Fleet Upgrades
• Fuel switching
• LEED Buildings

You name it, it’s been done before, it’s failed. 

You name it, it’s been done before, it’s worked.

I don’t layout this dichotomy to convince you that mindset is the difference between a successful project or a failed project (although, it can be) or to expound on the universal benefits of The Secret😉 I am drawing attention to this feedback because it demonstrates two important things:

1. Whatever you are pitching is eliciting fear
2. You need to manage this fear and mitigate project risks

Silver Lining

We’re entering the largest migration of humans our species has ever experienced. 80% of our population lives at sea level and every system you can think of is going to experience radical changes. Thankfully, technology will be there to help us wherever we can leverage it. Hundreds of years of research, development, and growth have us the most prepared we ever could be.

What is leadership? It’s different than management or hierarchy. Even if we tend to call groups highly ranked people “leadership” teams, they may not be skilled leaders. 

Navigating the differences between management, leadership, titles, and promotion tracks tend to overcomplicate what leadership really is. As much as I’ve studied and struggled with leadership, I don’t think I settled on a unifying theory until I read Jocko Willink and Leif Babin’s Extreme Ownership: How U.S. Navy SEALs Lead and Win. This TEDx video does a great job summing it up. 

To hit the highlights: 

Extreme Ownership

There is no one else to blame; you must own problems along with solutions; commit to lead up and down the chain of command. 

The 4 Laws of Combat

1. Cover & Move
2. Simple
3. Prioritized & Execute
4. Decentralized Command

Mindsets for Victory

1. Default: Aggressive
2. Innovate & Adapt
3. Humility: Check Your Ego
4. Discipline = Freedom

I read/listen pretty broadly, and I know a subset of managers love pointing to the military as a cure-all. Almost everything Jocko shares on leadership reiterates humanity and that the best soldiers/employees are not and should not be robots. There are two reasons I love Jocko and Leif’s approach to leadership. The first is its simplicity. If everything is my fault, I always know where to start:) The second reason is that these are stress-tested principles. The number of leaders the U.S. military trains, nevermind the missions they’re entrusted with, likely makes them the biggest training pipeline in the world.

Relating this back to leadership, you are always a leader. You might not be in charge of the meeting, a project, or the first name on a presentation, but you’re still leading. To borrow from Seth Godin, leadership is a posture. A way of holding yourself constantly. How do you try this posture more consistently? 

Looking to nature, a flock of geese isn’t lead by the lead goose. They rotate this position throughout the migration process and draft off of each other to save energy. Whatever your organization is, I’m guessing it’s similar.

I have some form of dysthymia, now known as persistent depressive disorder (PDD). I was diagnosed in my early twenties, finally giving a name to a condition I had normalized for at least a decade. I know there is a spectrum of reactions to psychology and even naming/relevancy of various disorders. For me, this was a helpful step towards understanding and better managing myself. 

I was diagnosed by a psychologist (and I highly recommend medical professionals for all of your diagnoses) a few years into working together. I was on a broader quest to unpack my childhood and heal the wounds of a long-deceased alcoholic father, a dead brother, and a mother challenged by this and more. Beyond the narratives, I was in my early twenties and just starting to manage this life I was now responsible for. There were a lot of contributing factors to my experience of depression that extends beyond my natural PDD tendencies. In working with my depression, I learned some critical habits that have helped me personally and with my career in what can, at times, be profoundly depressing work.

Before we continue, I need to caveat that I’m not a doctor, and I don’t play one on the internet. My words represent my experience and what has worked for me, and there may be times when my tactics no longer match my biology or psychology, and those are the times when I need more help. 

Sleep, Diet, & Exercise

These are the three legs to my stool. I was lucky to learn this lesson early (so much career advice comes back to sleep, diet, and exercise), and I keep relearning this lesson. These three topics represent at least two sections of a bookstore, and there is lots of conflicting advice. I’ve heard them referred two as the tripod of stability, so:

• Leg One, Sleep – It is essential to get consistent, high-quality sleep. Your brain and body depend on this rest. 
• Leg Two, Diet – You need to eat in a way that fuels your body and your goals while acknowledging your limits. 
• Leg Three, Exercise – Exercise is one of the best ways to manage stress, stay fit, help you think, and can even be a reward.

Know Your Symptoms

When I’m getting depressed, I crave nicotine. It’s one of the most unambiguous signals I get. There are some years in college where I regularly had cigarettes, but I can’t say I’ve been a consistent smoker. 

The rest of my symptoms are more subtle, and I’m better at connecting the dots looking backward. Stretches of anti-social behavior, or harmful/crutch eating habits, or skipping exercise, or staying up too late, or playing too many games on my phone. It’s tough to say when these behaviors are part of depression or just part of a rough day or week. I try to stay aware of an increase in my subtle symptoms to see if adjustments can be made. 

Another clear signal I can get is from my wife. Which is to say, be open to cues from those that are closest to you. She’s usually at least a few days ahead of me in seeing that I’m depressed. 

Reduce the Cycle Time

Sometimes it takes me a long time, often too long, to recognize and address my malaise. Managing something chronic also means that you can’t expect to fix it. Instead, I focus on reducing the amount of time I spend depressed. This combines the two recommendations above. Sleep, diet, and exercise keep me running smoothly, and the symptoms I know to function as guardrails, keeping me on the proverbial road. Using these two systems, how can you recognize more that something isn’t right?

Make the changes you need to make and forgive yourself. Fix & forgive.

More Help

I would not be where I am today without high-quality therapy. One of the essential parts of working with a good therapist is a great fit. In addition to education and credentials, you two have to do some hard work together. Look at the first session as an interview (for both of you). It’s okay to switch or fire your therapist; just make sure it’s for the right reasons.

I called the 2016 election of Donald Trump. I bet my father inlaw $100 that Donald Trump would win during the Christmas of 2015. As negatively as I view The Donald as a person, much less the leader of a democracy, I think federal politics receives far too much attention. The majority of sustainability programs operate independently of national direction, funding, and even regulation.

Immediately after the 2016 election, I was in a staff meeting where leadership was sharing how we were in for a “rough couple of years in the sustainability space.” There is some truth to this statement. The Trump Administration has been a disaster from a lot of perspectives (over 100). Environmentally, the DOI and EPA leadership has been apathetic; in some cases, criminal (2). The missing piece of history is how unsupported climate change efforts have been throughout previous administrations. Republican administrations passed the majority of landmark environmental legislation.

Today (November 6th, 2020), we’re looking at the end of the Trump/Pence and the start of the Biden/Harris administration. It’s hard to understate the suite of obstacles this new administration is facing. A polarized nation, a raging pandemic, a sputtering economy, and deeply neglected institutions, to name just a few. 

We’re also in a moment where Democrats acknowledging climate change is a progressive act. Biden does not support the Green New Deal and found it essential to defend fracking during his candidacy. His support for renewable energy is economically conservative. Coal can’t survive present-day economics despite subsidies (~$4B/yr), lax regulations, and significant royalty loopholes. Renewables have won the energy price war and will only become cheaper, with or without a carbon tax.  

The last four years have been some of my most productive. My work did not depend on President Donald Trump. As excited as I am for President Biden and Vice President Harris, I can’t imagine what direct effect they’ll have on my next four years. I’d say the same for my peers and sustainability on the whole. 

Don’t use federal politics as an excuse. The work is there no matter who is in charge.*

* You’re in charge.