What Goes Around
Cleveland Clinic's Green Revolving Fund sets a standard for other health systems looking to finance energy efficiency projects.
Many hospitals struggle with the decision to implement energy efficiency upgrades. Tight budgets make financing capital-intensive projects problematic, and finding sources of funding for urgently needed energy investing is not always an easy task.
But Cleveland Clinic, an established pioneer in the medical field, is breaking ground in sustainability by making a major commitment to reducing its energy usage, and the hospital has found an innovative financing model to help it realize sizable energy savings.
Cleveland Clinic has established a $7.5 million Green Revolving Fund to invest in energy efficiency projects. The fund is not only the largest of its kind in the health care industry, but is also one of the largest of any business sector in the nation.
“We saw this as an amazing opportunity to invest in energy conservation projects that benefit the environment, benefit the health of our patients and also lower the cost of serving those patients,” said Jon Utech, senior director for Cleveland Clinic’s Office for a Healthy Environment.
Cleveland Clinic is always looking at the triple bottom line to help its patients and communities—social, environmental and financial. “Energy is definitely one of the most compelling investment cases for a triple-bottom-line mentality,” said Utech. “We want to be a leader in showcasing some of the best examples of how to meet those triple needs in ways where everybody benefits, and the patients we serve can flourish.”
Green revolving funds work by investing in energy efficiency projects to reduce energy consumption and then reinvesting the money saved into future projects. As projects pull money from the fund, the savings from reduced energy consumption is tracked and reinvested along with any rebates received.
Cleveland Clinic diverted existing capital from its infrastructure fund for its initial investment and will release money annually based on a specific set of principles from its green fund charter. All investment is directed toward capital projects, so they must be of a certain size, and all must be energy-related.
The hospital takes proposals from a variety of internal applicants and ranks the projects by how quickly they will reduce energy bills and pay back the capital. Payback is normally one to four years, and while all savings are initially returned to the fund to finance future projects, the energy savings will continue to benefit the hospital into the future. “Once the project is paid back, we have shifted the bottom line,” said Utech.
Cleveland Clinic’s largest project to date—an industry-leading LED lighting retrofit—is in progress. By modernizing 400,000 existing lights to LED, the health system is seeing more than a 50 percent reduction in energy lighting usage.
Other projects underway are optimization of the chillers that cool the medical center’s buildings to make them operate more efficiently, and improvements in the efficiency of automation systems that control the temperature and lighting in buildings. “These are great opportunities for hospitals to save energy and achieve the same [clinical] outcomes for patients and caregivers who work in those spaces,” said Utech.
Cleveland Clinic’s Green Revolving Fund is part of the Sustainable Endowments Institute’s Billion Dollar Green Challenge. The challenge encourages colleges, universities and other nonprofit institutions to invest in self-managed green revolving funds, with the goal of creating a combined total of $1 billion in funding.
“We are honored to welcome Cleveland Clinic to the Billion Dollar Green Challenge, and are excited about their commitment to developing the largest green revolving fund in the health care field,” said Mark Orlowski, executive director of the Sustainable Endowments Institute. “We’re enthusiastic that more hospitals will follow its leading example and commit to investing in deeper building energy efficiency through self-managed green revolving funds to reap significant financial and environmental benefits.”
Cleveland Clinic, rated No. 2 in U.S. News & World Report’s Best Hospitals rankings, is one of the largest medical centers in the world, with locations across the globe and more than 6.6 million outpatient visits in 2015. Its longstanding commitment to be at the forefront of the health care industry is matched by its commitment to energy conservation and sustainability. Among other affiliations, the hospital is an ENERGY STAR partner, a member of Practice Greenhealth and the U.S. Green Building Council, and an active participant in Sustainable Cleveland 2019.
Cleveland Clinic was also the first hospital to join President Obama’s Better Buildings Challenge, which asks companies to reduce energy consumption by 20 percent by 2020. Through the end of 2015, it had reduced its energy demand by 12.3 percent as part of this challenge.
“Our CEO, Dr. Toby Cosgrove, has challenged our organization to find ways to deliver outstanding patient care with the same quality outcomes, and to do that more efficiently and at the same or lower costs,” said Utech.
This commitment to overall sustainability has also allowed the hospital to reach out to caregivers and help define their role, Utech added. “Almost everybody, every day, has the opportunity to switch off a light switch or do the right thing when it comes to temperature in the space they are in. All of our caregivers can play a role in this. That is a big part of our success. Senior leadership is committed, and we have good engagement from our caregivers.
“Health care is going through a tremendous transformation,” said Utech. “We see the link between environmental health and human health. At the same time, health care is an energy-intensive industry. By making a commitment to energy efficiency, we make our air cleaner, we make our patients healthier and we make health care more affordable. That is something anyone can get behind. It’s a strategy where everybody wins.”