On the Development of a Financing Instrument in the Form of a
"Bond for a Sustainable Society"

For Financing Sustainable Energy and Energy-Efficiency Hardware

A continuing problem in the financing of renewable energy equipment, and of equipment of high energy-efficiency, involves the high "payback" expectations of the potential customers. Many of them expect (and even demand) a payback of 5 or even of 3 years. Since this is an unrealistically high demand for these technologies, the equipment often does not get purchased, and people continue using equipment which needs much more fossil fuel than is really necessary, more than society can really afford.

For many commercial customers, such payback demands are not limited to energy equipment, but extend to essentially all of the investment needs. This is why most businesses do not have full ownership of the buildings they occupy; but have them mortgaged as fully as possible through a bank, or have them leased from the owners. The trouble is that there are still no adequate financing mechanisms for renewable energy equipment and for equipment of extra high energy-efficiency, despite the fact that it is clearly in society's interest for these to be financed.

It really seems easy to solve this problem, when one realizes that a 5 or 3 year payback corresponds to a 20% or 33% return on investment, and that the average citizen only has access to Savings Accounts, bonds, or other such investment instruments which offer a return of perhaps at most 5%: corresponding to a 20 year payback. All that has to be done is to create a financial bridging instrument which can be given an appealing name such as:

"Bond for a Sustainable Society,"

which might be offered to the public at a return of perhaps 6%, corresponding to a 17 year payback; and for which the proceeds might be loaned out to potential equipment buyers at an interest of perhaps 9%, corresponding to an 11 year payback. The numbers can of course be adjusted, but the margin (between 20 years on the one hand, and 3 to 5 years on the other hand) offers a large range of possibilities. For security, the repayment mechanism could be established through the gas or the electric utility companies. The bonds could pay off interest and principal at maturity, or could pay regular dividends. If they were designed, established, and publicized properly, and if they were offered widely, they could become a popular investment instrument and an effective financing instrument. People might want to use them for gifts, for savings, for retirement fund investments, etc. The bonds could serve as good investments, for a clearly good cause.

By: Francis de Winter
Former Member of the Board of Directors
International Solar Energy Society
Altas Corporation
500 Village Circle
Santa Cruz, California 95060, USA
Phone: +1 (831) 425-1211

original 1994.10.07; revised 1994 February 10; revised 2002 April 27