ring-fenced loans
“A ring-fenced loan fund is established. This ensures that the
costs and revenues from an investment can be identified
clearly in the client’s accounts, and provides a focus on
carbon reduction that might otherwise not exist. Our
contribution is a loan matched by the client, and projects are
financed directly from this pot. The savings achieved are
returned to it until the capital has been repaid from savings.”
Alastair Keir, CEO, Salix Finance (right)
Salix Finance has formulated carefully the No less important is that the organisation can
terms under which its funds are made avail- demonstrate the management commitment
able to a public sector institution. Individual and resources to continue delivering qualify-
carbon-reduction projects financed from one ing carbon-reduction projects as funds be-
of these 50-50 pots must demonstrate a pay- come available from revenues returned to the
back period of under five years. fund from earlier projects.
This ceiling helps to bring forward projects All savings achieved beyond the payback
which can reduce carbon consumption period of any individual project are applied to
quickly. It also avoids public funds being tied reduce the energy bills of the client institu-
up for a generation in meritorious investments tion and, implicitly, the total energy costs of
but on which the savings might be small rela- the public sector.
tive to the capital cost. As Mr Keir noted, this frees up funds which
Potential projects are also assessed for their can be applied to front-line services. “The
lifetime carbon ‘cost’, which must be lower process of ring-fencing the loan fund provides
than £100 for each tonne of CO a budget line for energy managers, and an in-
Were a loan fund to be supporting just a sin-
2.
centive to fine-tune their operations to ensure
gle project, the sum lent by Salix would be the fastest possible payback and thereby an
repaid at the end of the payback period. Much early release of the savings.”
of the impetus towards carbon reduction
would be dissipated at that stage and many of
the longer term benefits which the Salix Fi-
Punching above weight?
nance team is seeking to establish could well Salix Finance has been described in the me-
be lost; any savings achieved being no more dia as an organisation which tries to punch
than a flash in the pan. above its weight. Certainly in terms of its an-
nual budget and the total value of investments
Portfolio of carbon-saving projects
to date (£40 million), the company is much
smaller than the majority of the institutions it
An essential feature of the Salix Finance strat- has assisted so far.
egy, however, is that for an institution to be Its ability to act as a catalyst for carbon re-
selected as a client, it must put forward a port- duction is probably its greatest asset. Though
folio of carbon-saving projects. its function is to provide loans, the Salix CEO
In addition to meeting the payback and carbon cost criteria, applicants to Salix must demonstrate the
management commitment and resources to continue delivering qualifying carbon-reduction projects.
26
The Informed Executive
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