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					         Digital Federal Credit Union
              Sustainability Plan



                   Prepared by:
                  Adam Brissette
                  Fadwa Jaouane
                 Tallis Salamatian




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Sustainability Plan Outline

1.0    Introduction
1.1    About the Company
1.2    Project Background
1.3    Objectives
1.4    Methodology
1.5    Recommended Initiatives

2.0    Green Financial Products and Services
2.1    Home Equity Loans
2.11   Borrower benefits
2.12   DCU benefits
2.13   ROI/Payback Period Home Equity Loan towards Solar Energy
2.2    Energy Efficiency Mortgages
2.21   Homeowner Advantages
2.22   DCU Advantages
2.3    Energy Focused Online Banking Application

3.0    How to implement your Green Lending Initiatives
3.1    Establish a sense of urgency
3.2    Create a powerful guiding coalition
3.3    Integrate DCU’s Vision into the Green Lending Campaign
3.4    Communicate the Vision by a Factor of 10
3.5    Empower others to Act on the Vision
3.6    Planning and Creating Short Terms Wins
3.7    Do not declare victory too soon
3.8    Institutionalize New Approaches

4.0    Performance Measurement

5.0    Roadmap for Green Lending

Addendum A DCU Sustainability Initiatives
Addendum B Solar Energy
Addendum C The Green Envelope
Addendum D Energy Efficiency Mortgages
Addendum E Preliminary DCU Sustainability Event Plan




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1.0 Introduction:
Sustainability can be defined a number of ways depending on the context. A broadly
accepted definition is that a sustainable society is one which satisfies its needs without
diminishing the prospects for future generations. Sustainable behavior is cyclical and
can remain viable in perpetuity, as opposed to unsustainable behavior, which is linear
and must come to an end. Acting sustainably requires a decision making process that
weighs economic benefit, social benefit, and the environmental impacts of one’s
actions.

From DCU’s perspective, and that of any business, sustainability means remaining
operational for the long term. The importance of sustainable development for DCU is
clear when viewed through its stakeholders. As a financial institution, DCU’s members
depend financially on the services DCU provides. Employees of DCU depend on the
company to earn a living. The impact of sustainable behavior is far reaching for DCU,
and with this premise we began our sustainability plan for the company.

1.1 About the Company
Based in Marlborough, MA, Digital Federal Credit Union (DCU) was chartered in 1979 for
employees of Digital Equipment Corporation. DCU has grown its member base
throughout the years and currently they serve 600 companies with 350,000 members.
DCU offers a full range of financial services to its members. DCU identifies members
and employees as its main stakeholders. Their motto, “The DCU Way”, details DCU’s
people first philosophy. Among credit unions, DCU is a leader in innovation, particularly
in the electronic services space. Currently DCU has $3.7 billion in assets, making it the
12th largest credit union in the United States.

1.2 Project Background

On September 1st, Craig Roy, Senior VP of Support Services and Kris Van Beek, Senior VP
of IS and Risk introduced our class to their company and also discussed sustainability.
Internally DCU had implemented several sustainable initiatives throughout their
operations, and realized the costs savings of reduced paper consumption, and reduced
energy and electricity usage in their buildings. A more detailed summary of DCU’s
initiatives prior to the start of this project is detailed in (Addendum A).

Services currently offered by DCU also promote sustainable behavior to members as
well. Services include expanded paperless banking, where members receive statements
online—reducing paper usage as well. Innovative service offerings, such as remote



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deposit capture also promotes sustainability-- allowing members to make deposits from
their phone, eliminating any paper from deposit transactions.

Our team at Clark University was tasked with creating an actionable plan to further
sustainability at DCU, building on of their previous initiatives. The first step in creation
of our plan was identifying the objectives.

1.3 Objectives
We identified two primary objectives for our sustainability project based on our initial
meeting. The first objective was to identify innovative green financial services and
products that will provide incremental income to DCU while expanding the member
base. Secondly, our objective was to involve key stakeholders in the sustainability
initiatives.

1.4 Methodology
In identifying the scope and direction of our plan, we initially focused on three areas—
DCU’s core business and vision as a company, DCU’s main stakeholders and lastly the
objectives of our plan.

DCU’s mission statement is based on doing business “the DCU way”, which is based on
three principles. The first principle is people come first, indicating the importance of
employees and members in the company’s decision making. The second principle is ‘Do
the Right Thing,’ emphasizing DCU’s commitment to offering services that look out for
the best interests of members. The final principle is to make a meaningful difference in
the lives of members. DCU’s vision is to “help all members achieve their financial goals
through providing members with superior value through low rate loans with caring
professional service”.

The key stakeholders for DCU are clearly integrated into their company goals.
Employees and members are tied to all three principles. Given the nature of a credit
union, DCU’s members are also the owners further unifying the needs and goals of all
key stakeholders in the company.

The scope of our project for DCU includes identifying potential sustainable services that
would earn DCU incremental revenue, expanding their member base, and promoting
sustainability to key stakeholders.




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1.5 Recommended Initiatives
Based on DCU’s core business, vision, main stakeholders, and our plan objectives; our
initial research focused on the member and how DCU could better serve them within
the lens of sustainability. Given that for a majority of DCU’s members, their major
financial asset is their house; thus we began to assess the costs and energy usage
associated with homeownership. We identified multiple energy efficient home
improvements that will allow consumers to reduce yearly energy costs. Through our
research we also determined that renewable energy such as solar can further reduce a
member’s utility bill, even after factoring in the financing costs of the purchase of solar
panels. The main barrier for members interested in energy efficient upgrades and
renewables is availability of financing, creating a great opportunity for DCU.

Through offering a range of financing options to members for energy efficient home
upgrades and installation of renewables, DCU can make meaningful impact towards
reduction of its stakeholders’ carbon footprint; while at the same time: growing its
member base, earning revenue through lending and helping members reduce their
yearly energy costs.

We propose specific financial products DCU could offer that would finance energy
efficiency upgrades and renewables for homeowners. Included with this detail is an ROI
analysis and payback period for the investments. This section will provide more hard
data making evident that offering these loans is mutually beneficial economically to DCU
and the members taking out the loans.

Addendums B, C and D provide an analysis of each energy efficiency improvement or
renewable investment that we propose DCU provide financing for—specifically home
retrofits (the green envelope) to reduce energy usage and costs, and investments in
solar energy. The analysis details the environmental benefits of each offering along with
the economic case for both consumer and DCU.

The product offerings are followed by a section on change management targeted
towards DCU’s members who are the target market for the loan offerings. This section
serves as a road map for implementing the green lending campaign. We propose a
marketing and education campaign that will motivate potential borrowers to act,
highlighted by a sustainability conference targeted towards educating DCU members to
the potential benefits of residential energy efficient investments and upgrades.




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2.0 Green Financial Products and Services
The financial products that we propose DCU offer target homeowners that are investing
in energy efficient upgrades to their home or investing in renewable energy such as
solar. In this section we will detail specific financing options that DCU can provide,
explain how these loans fit into DCU’s business plan and quantify the return on
investments (ROI) and payback periods of the different loans.



2.1 Home Equity Loans
Home equity loans are an excellent financing option for home energy retrofits or
investment in renewables as they provide access to funds for a one-time expense.

2.11 Borrower benefits

From the borrower’s perspective, there are multiple benefits to a home equity loan.
First, the borrower gets the full amount of the loan upfront. The fixed interest rate
option for a home equity loan brings predictability to the consumer through fixed
monthly payments and also reduces their interest rate risk. The member receives a
certain payment schedule that provides them with security. Also, DCU currently does
not charge closing costs on home equity loans, further providing the member good
value with value. The appraisal fee for a home equity loan is also returned if the
borrower qualifies.

2.12 DCU benefits

Offering home equity loans to members for energy efficiency fits into DCU’s core
business given that they currently provide members with multiple home equity loans
and lines of credit. As of August 2010, near $714 million, or 21.5%, of DCU’s loans to
members were of the home equity variety. To put that into perspective, 20% of DCU
assets (before accounting for allowance for loan losses) are home equity products (DCU
Financials, 2010). Marketing these products towards consumers looking to invest in
home energy projects in order to reduce their monthly costs would also coincide with
their current offerings of the second chance car loans.

2.13 ROI/Payback Period Home Equity Loan towards Solar Energy

In analyzing investments on solar energy, we analyzed cash flows from both the
borrowers and banks perspective. The payback and ROI analysis is based on the
following framework.

      Home equity loan 10 year fixed rate loan

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      Tax incentives and rebates (generally received within 1 year) used to pay down
       principal on loan
      DCU lends at 7%
      Solar energy credits (SRECS) sell for $400 (conservative est., recently sold for
       $500)
      Initial Cost per KWH .12, increasing 5% each year
      Solar system is 3kW (real life case Sun Bug Solar $25,200)
      Homeowner reduces electricity bill 25% (conservative)
      Borrowers payback period and IRR based on project energy savings, and sale of
       SREC credits (see Addendum B for more information), and monthly payments for
       the life of the loan
      IRR based on reinvestment of cash flows at 7%

Based on this model, we calculate that the bank’s yields an APR of 7.32%. This yield on
assets would provide DCU with a spread of approximately 6.12% based on their most
recent cost of liabilities, approximately 1.20% (DCU Financials, 2010).


The borrower’s payback period would be 9 years. The ROI of the solar investment over
10 years is 106%. However, using the most recent price SREC’s sold for in August, $500
per solar renewable energy credit, the homeowner’s payback period is reduced to 7.25
years. The ROI with SREC at the selling price would be 11.4%.

After the payback period, the investors will continue to receive the benefits of reduced
energy bills and the sale of SRECs, providing borrowers a positive return on their
investment. For a more in-depth review of the economic, social and environmental
benefits of solar energy refer to Addendum B.




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2.2 Energy Efficiency Mortgages
The use of Energy Efficiency Mortgages, which give the opportunity to finance cost-
effective measures as part of a single mortgage and stretch debt-to-income qualifying
ratios on loans, have therefore gained momentum across the nation. Indeed, they
present a great vehicle and have a significant potential of making the housing
marketplace more environmentally friendly, as well as inducing consequential money
savings that could be invested in productive projects otherwise.

2.21 Homeowner Advantages

By increasing the cash flows gained from efficient houses as the energy savings are
usually bigger than the up-front investment, EEM’s enhance the borrowers’ ability to
qualify for loans, as well as increasing the size of the mortgage loan amount. Indeed,
EEM’s do not require borrowers to qualify for additional financing as cost-effective
energy improvements result in lower utility bills, making more funds available for
mortgage payments. For already existing houses, EEM’s enable homeowners to
refinance their property to add energy efficiency upgrades and improvements to their
house as part of the underlying mortgage financing transaction. This process allows the
energy retrofit to be financed over a longer period of time, with lower monthly
payment, as the costs are folded into the total mortgage amount. Overall, EEM’s allow
homeowners to increase their housing affordability, borrowing power, comfort, house
performance, resale value, as well as reducing their energy bills and consumption.

Addendum C further discusses the types of upgrades that can be financed through an
EEM.

Practical example

Energy-efficient homes provide their occupants with interesting opportunities in terms
of cost-savings when combined with an EEM.

                                              Older Existing Home               Same Home With
                                                                                Energy
                                                                                Improvements

 Home Price                      $ 150,000                          $ 154,816

 Loan Amount (90% mortgage, $ 135,000                               $ 139,334
 8% interest)

 Monthly payment                 $ 991                              $ 1,023

 Energy bills                    $ 186                              $ 93

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                                           Older Existing Home              Same Home With
                                                                            Energy
                                                                            Improvements

The true monthly cost of $ 1,177                                  $ 1,116
home ownership

Monthly savings                                                  $ 61

Source: http://www.hud.gov/offices/hsg/sfh/eem/eemhog96.cfm

EEM’s also provide homeowner with an increased borrowing power.

                                           For a standard home
                                           without energy
                                           improvements:


Buyer's total monthly income   $5,000


Maximum allowable monthly $1,450
payment 29% debt-to-income
ratio

Maximum mortgage at 90% of $207,300
appraised home value
                                           For an energy-
                                           efficient homes:

Buyer's total monthly income   $5,000


Maximum allowable monthly $1,650
payment 33% debt-to-income
ratio

Maximum mortgage at 90% of $235,900
appraised home value

Added borrowing power due $28,600
to the Energy Efficient
Mortgage

Source: http://www.hud.gov/offices/hsg/sfh/eem/eemhog96.cfm


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Interest rate 7.5%, downpayment of 10%, 30-year term, principal & interest only (tax &
insurance not factored.)

This buyer got into a home worth thousands of dollars more, just because it was energy
efficient. That could mean a home with more space, in a better location, or in better
overall condition.

2.22 DCU Advantages

Financial Institutions have the opportunity to write more and bigger loans, through an
increased borrowing power as well as house value, with less risk. Indeed, since these
loans are based on strict quality home audit and rating, lenders have more confidence
that the improvements made will result in a positive cash flow for the consumer. By
marketing this financial product as well team up with local builders, lenders can actually
become leaders in the community in terms of green lending. Moreover, Financial
Institutions which promote EEM’s will have the advantage of differentiating from the
competition by demonstrating environmental leadership and commitment to
environmental issues.

Refer to Addendum D for a more detailed discussion of EEM’s.




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2.3 Energy Focused Online Banking Application

There are two major barriers for homeowners to invest in energy efficiency or
renewables: financing and quality of information. DCU can address the financing barrier
through offering the loans discussed above—energy efficiency mortgages and home
equity loans. The information barrier we discuss now.

People want to reduce energy costs and reduce energy usage. The difficulty however is
choosing the right project in order to spend less and save more, determining which
rebates and incentives are available, and then identifying the best way to finance the
project. DCU can remove this barrier by providing this information; educating members
and helping them make intelligent and informed decisions.

We propose implementing an online banking platform that quantifies energy usage on
the same website where members manage their money DCU could help members
answer three very important questions: How much energy do I use? What can I do to
reduce it? How can I pay for it? Developing this user application to provide the
consumer with knowledge—quantifying energy savings, calculating the cost of projects,
maintaining vendor information—can be time consuming and potentially costly for DCU.
There are however, companies that offer online banking solutions to banks for minimal
or no cost.

A start-up company perCent Inc. (http://www.percentinc.net/) has created an online
solution they offer to banks that allow people to manage their energy where they
manage their money. To start, the user would update a personal profile including
information such as the amount and types of cars they drive and the size of their house.
After the profile is created, the online application would automatically calculate the
users carbon footprint based on the actual bills that would hit their DCU bank
accounts—oil bills, electric bills, and fuel bills. In implemented, bank members could log
into their DCU bank account and receive a real time auto-generated energy statement
at the same time viewing their bank statements. In addition to allowing members to
better understand their energy usage, the online platform also allows them to identify
and research cost effective solutions appropriate for their needs.

The service would allow DCU to attract and retain members, spotlight their financing
options for home energy projects and further promote sustainability.




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Example of Energy Statement:




Example of Project research:




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3.0 How to implement your Green Lending Initiatives
The success of the green lending initiatives we are proposing center on changing the
behaviors of DCU members.

The act of offering these products may not be sufficient to make people act and take out
loans. You need to change the consumer’s behavior, motivate them to demand these
products.

During the next section we will outline a plan to change the behavior of the DCU
member, making the environmental, social and economic benefits of these loan
offerings a reality.

3.1 Establish a sense of urgency
“Without a sense of urgency, desire loses its value.” Jim Rohn

For a majority of individuals change is uncomfortable. Unless the benefits of change are
clear, or the negative consequences of not changing are evident, people in general will
not change their behavior. This pertains to changes in behavior at work and at home,
from changes in eating habits to changes in purchasing behaviors.

In terms of green lending, DCU needs to motivate people into action by creating a sense
of urgency within its employees and members alike. Change will require cooperation
from both stakeholder groups in order to be successful.

From an internal perspective, marketing or creating a product requires buy-in from all
different areas and levels of the company. Marketing needs to understand the
environmental, social and economic benefits of the products, the sales area needs to be
able to communicate these benefits to members, and all employees need to understand
that these loans are not a temporary pilot but a permanent program.

For the members, DCU must communicate directly through multiple channels the
benefits of renewables and energy efficiency loans. Education through a steady stream
of information will engage people and force them into action. What needs to be
communicated? Communicate the fact that energy and electricity costs are rising and
will continue to do so. Educate consumers on the savings of energy efficiency measures,
and the potential return on investment on solar energy as we have detailed above.
When consumers view the borrowing as an intelligent investment as opposed to simply
borrowing money with no purpose, they will act.



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The goal is to drive people out of their comfort zone. Make them realize the potential
risks of not acting—throwing money away in perpetuity on an energy inefficient house
and leaving themselves vulnerable to yearly increases in energy costs. People do not
like change unless the benefits of change are clear, or the negative consequences of not
changing are impactful. In communicating the benefits and risks of not acting a sense of
urgency is created within the consumer, breaking down the first and major barrier to
change. The next step is to create a powerful coalition who can guide this change.


3.2 Create a powerful guiding coalition
“Efforts that don’t have a powerful enough guiding coalition can make apparent
progress for a while. But, sooner or later, the opposition gathers itself together and
stops the change.” John Kotter

As we have discussed, the change effort is two-fold. Internally, the change is a
commitment to offering loans promoting sustainable behavior. The second portion is
changing the behavior of the consumers to borrow money and demand these loans.
The powerful guiding coalition driving both of these changes must be managers with
enough power inside the organization to develop these products and with the resources
to educate and market these products to members. The most effective coalition would
be managers or executives from marketing, product development, sales and lending.

The presence of employees with power across all areas of the company on the coalition
is integral, in order to obtain buy-in through all areas of the organization. If a few mid-
level staff members were researching or developing a new potential line of loan
offerings, the signal to the rest of the company is that there is no long term
commitment from senior management to the initiatives. Alternatively, a group of
executives spanning different areas of the organization working on initiatives to develop
and market green loans would signal a commitment to these offerings as opposed to a
short term fad.

Once created, the coalition members must be on the same page and share the same
vision. Creating that vision brings us to the third step in change management.

3.3 Integrate DCU’s Vision into the Green Lending
Campaign
“Effective leaders help others to understand the necessity of change and to accept a
common vision of the desired outcome.” John Kotter

DCU’s vision, highlighted by the DCU Way, is member centered. The vision is to help all
members achieve their financial needs by doing business the DCU Way: people come

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first, do thing right thing, make a difference. In many cases of transformational change,
a company will need to alter their vision as a company and communicate the change in
direction. The initiatives we are proposing; however, simply require expressing how the
new product offerings fit directly into DCU’s current vision.

Offering loans for energy efficient household upgrades and residential use of
renewables fits directly into DCU’s current vision. This strong connection needs to be
communicated with members and employees. Offering loans promoting sustainability
IS doing business The DCU Way.

        People Come First— through providing these loans DCU will help you lower
        energy costs a substantial amount and save money over time.
        Do the Right Thing—these choices are in your long term best interest, financially
        and environmentally.
        Make a difference—through taking a loan to invest in your house, you are also
        investing in the future. Helping save you money while helping save the
        environment through reducing carbon footprint.

3.4 Communicate the Vision by a Factor of 10

“Good business leaders create a vision, articulate the vision, passionately own the vision,
and relentlessly drive it to completion” Jack Welch

Green lending fits into DCU’s vision, but unless this connection to the company’s vision
is communicated, the financing opportunities will not be utilized by members. A recent
study showed that more than three quarters of bank members are interested in
discounts on interest rates to purchase energy efficient appliances, homes and cars, but
two-thirds did not know whether their financial institution offered those (Informa
Research Services, December 2008). This statistic underscores the importance of
communicating your vision as a company, and the products you are offering to
members through all possible channels.

Prior to marketing or providing green loans, DCU must first demonstrate to members
how it has acted sustainably and benefited from these actions. In other words, the
company must demonstrate it “walks the talk.” Creating a section on the DCU website
dedicated to informing members of its green initiatives would do just that. DCU has
benefited from energy conservation, paper reduction, waste reduction and recycling
initiatives. The credit union also promotes sustainability through online banking
services that reduce trips to the bank and paper usage in banking transactions.
Members need to be made aware of these initiatives, further connecting the company’s
own actions to the green financing products they it offers.



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DCU must also communicate how sustainability and offering green loans ties into its
vision. We propose holding a seminar directed towards educating consumers on the
importance of sustainability and how individuals can benefit through sustainable
behaviors in their home. Through this event DCU could begin the education process and
promote its green financial product offerings at the same time. The conference would
include professionals that work in sustainability, companies that develop and install
renewables in residences, contractors that perform energy efficient upgrades on
households, and most importantly DCU professionals who would provide members with
the financing to make members’ residences sustainable. The seminar would kick off a
multi-channel marketing campaign to promote DCU’s energy efficient lending program.

After the seminar, the green lending campaign would be reinforced through different
communications channels. Online banking, ATM’s, radio ads and messaging on cell
phones all provide vehicles to educate the public on energy efficiency, renewable
energy and sustainability in general. The content does not have to be solely
advertisements for products, the messages could include facts on household energy
usage, tips on how to reduce energy costs, or a quick example of an energy efficiency
initiative DCU has implemented (i.e. low flow faucets, T8 light bulbs, HVAC controlled
thermostats). Consistent messaging through all media channels will further connect the
green lending to DCU. These efforts will ensure all members or perspective members to
know the answer to the following question, “Does DCU offer lending for energy efficient
and renewable energy investments?”

For a preliminary event plan of the DCU sponsored sustainability seminar see
Addendum E.

3.5 Empower others to Act on the Vision
“As we look ahead to the next century, leaders will be those who empower others.” Bill
Gates

DCU’s vision involves helping all members meet their financial needs. Providing
financing for residential energy efficient upgrades or investments in renewable energy
can assist members with meeting their financial needs while subsequently helping the
environment.

Implementing an online interactive dashboard dedicated to energy usage and solutions
would provide members with the knowledge required to choose intelligent investments.

Through offering financing for green investments and educating their members, DCU
would empower their members to further achieve their financial needs.

3.6 Planning and Creating Short Terms Wins
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“Seeing is believing”

Educating members on benefits of energy reduction is a powerful change agent;
providing members with real life examples of these benefits makes them tangible. A
DCU member only presented with statistics and data on hypothetical returns from
investing in energy efficiency or renewables may still have some hesitancy to make an
investment. Real life examples of members that have realized the benefits of
sustainability prove that the grass really is greener on the other side, removing
ambiguity from the benefits received through financing energy solutions.

The DCU website can be used as a vehicle to communicate the short term wins. Sharing
facts about the realized gains members have achieved through energy efficiency signals
to other DCU members that they could benefits from green loans as well. The quick
wins should be demonstrated to other members soon after the green lending campaign
has begun. Failure to do so will cause you to lose the interest of skeptical members,
making the green lending initiatives less impactful.

Celebrating quick wins is integral for communicating the benefits of the program.
Considering these wins the end goal of the lending initiatives would cut short their
impact of the green lending program. This is discussed further in step 7.

3.7 Do not declare victory too soon
“Congratulations Red Sox, 1986 World Series Champions.” Message on Shea Stadium Scoreboard


If our first six steps are followed, we contend that the implementation of the green lending
initiatives will be successful, and that many members will have realized the benefits of the loan
programs. The program however is meant to have a meaningful and lasting impact to many
generations of DCU members, not simply the first borrowers.

A main reason we believe lending for energy efficiency and renewable energy is a great
opportunity is the bright future of sustainability. Investing in sustainability is a megatrend that
will have lasting implications (Harvard Business Review, 2010). Failure to continue to promote
green lending after its initial success would undermine its potential long term economic and
environmental benefits to both DCU and its members.


3.8 Institutionalize New Approaches
If ‘The DCU Way’ is successfully integrated into the green lending program and DCU remains
committed long term to the initiatives long term, then institutionalizing the new financing
options should be a natural progression.



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A public commitment to sustainability would further institutionalize a green lending campaign
that promotes energy efficiency. Through creating a sustainability report annually, DCU would
‘talk the walk,’ detailing their own internal sustainability initiatives. In doing so, sustainable
behaviors is ingrained into the corporation and the green lending program likewise is further
institutionalized as an important part of DCU’s business.


4.0 Performance Measurement
For performance measurement and reporting we have metrics focused in three areas; member
awareness of loans, number and size of loans made, and the performance of the specific loans.

Perhaps the most integral part of implementing the green lending initiatives is communicating
the types of loans and educating members on the benefits of energy efficiency. As such, DCU
needs to measure the effectiveness of the marketing initiatives. We propose performing a
survey of DCU members a month after the green lending campaign begins followed by quarterly
surveys following the first.

The questions asked can be simple, not time consuming for members and can be done at
branches or online:

    a. Were you aware DCU offers loans and mortgages promoting energy efficiency and
       investments in renewables? If yes, how did you find out about these offerings?
    b. Have you/would you consider taking advantage of the opportunities provided by these
       loans? If no, why?

The data from the surveys will provide valuable information. Management can determine if
communication efforts have generated sufficient awareness in the member base, and what the
most effective communication techniques have been. Second, management can determine
what percentages of members with an awareness of the program would consider borrowing
money to invest in energy efficiency or renewables. For members who are not interested, DCU
can determine if their non-interest can be changed through more clear communication and
education. The goal we set for awareness metrics is that the percentage of members aware of
the green lending initiatives should increase each quarter, and by the end of the year, over 75%
of members should be aware.

The number of loans and total dollars of both home equity lines for solar and energy efficiency
mortgages should be tracked and reported on a monthly basis by senior management. The
number of loans made and totals dollars lent ultimately drives the success of the campaign. The
more loans made, the more energy savings realized by the member, the larger the impact on
the environment, and the more incremental loan income raised by DCU. In addition to tracking



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sheer number and size of loans, repayment and delinquency rates should also be monitored
closely on a monthly basis to determine the quality of the loans.


5.0 Roadmap for Green Lending

Our sustainability plan began with identifying green loans and services to offer ended
with measuring the performance of our implemented initiatives. In this section, we will
provide a timeline for specific actions.

1.      Develop green financing options

We specifically identified offering home equity loans for purchase of solar energy, and
becoming a lender of energy efficiency mortgages. Offering home equity loans is a key
component of DCU’s core business thus offering home equity loan type products
specifically for solar should only take minor adjustments (i.e. refinancing option when
tax credit received to pay down principal). With regards to energy efficiency mortgages,
DCU currently offers FHA and VA loans, and FHA and VA also sponsor energy efficiency
mortgages that DCU could offer.

2.      Provide energy focused online banking application

People need to understand their energy usage and costs before making investments to
reduce them. This online banking application would allow members to quantify their
household energy usage, research appropriate solutions to reduce energy use, and
identify financing options to invest in their energy solutions.

3.      Hold a DCU Sponsored Sustainability Seminar

The benefits of holding a seminar on sustainability are multiple. First, DCU can educate
members on the benefits of the sustainability through the experiences of many sustainability
professionals. The seminar can also serve as a vehicle to make consumers aware of different
home energy solutions and the available options to finance them. From the perspective of
branding, the event can also connect green lending to DCU’s vision. Lastly, the event will expose
DCU to potential new members.

4.      Reinforce Green Lending Campaign through Multiple Channels

The seminar begins the member education process on energy efficiency and green lending.
Education should then be perpetuated through a steady stream of communication via different

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media channels. Online banking, ATM’s, radio ads and messaging on cell phones all provide
vehicles to educate the public on energy efficiency, renewable energy and sustainability in
general.

5.      Demonstrate Benefits of Energy Efficiency through Real Life Examples

Statistics on expected return on investment from home energy solutions will peak a
homeowners interest. Real life example of actual proof return on investment is more powerful
and will motivate many members into action. As members begin taking advantage of the
benefits provided through DCU’s lending, these should be communicated to members as soon
as gains are realized.

6.      Performance Measurement and Reporting

Management should review certain metrics on a monthly basis to determine the effectiveness
of the lending initiatives. The metrics reviewed should include areas such as customer
awareness and loan specific data such as number of loans, dollars lent, repayment rate and
delinquency rate. The data on the loans will detail the quantity of loans and quality of loans.
The goal of performance measurement is to determine if your communication efforts are
effective (awareness) and to determine if the company if benefiting from the lending initiatives
(loan specific data).




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                                                                                                                               DCU's Green initiatives and Cost effective solutions as of 2010
                                                                                                                                                              Facilities
                                                                               Current solution             Type of Solution                                  Description                           Location(s)                    Purpose
                                                                    Computerized Energy Management       Software /Hardware      Controls the schedules of HVAC and Lights                              HQ      Energy conservation
                                                                    Computerized Energy Management       Software                Controls the HVAC                                                      OC      Energy conservation
                                                                    Lights timer                         Hardware                Controls the light schedules per floor                                 OC      Energy conservation
                                                                    Light fixtures                       Hardware                Energy efficient super T8/T8 bulbs and Electronic ballast              HQ      Energy conservation
Addendum A DCU Sustainability Initiatives Prior to September 2010




                                                                    Light fixtures                       Hardware                Energy efficient T8 bulbs and Electronic ballast                       OC      Energy conservation
                                                                    EL Harvey & Son and Allied Waste     Waste management        Recycles up to 90% of our trash at their facilities               OC,HQ,Some Recycling
                                                                    EL Harvey & Son                      Waste management        Recycles all DCU's paper                                               All     Recycling
                                                                    Copy machines                        Hardware                LED Cathodes and Cool operation copiers (Low BTU emitions)                     Energy conservation
                                                                    800 Got Junk                         Waste management        Lamps, bulbs and hazardous materials disposal                          All     Green initiative
                                                                    7 day thermostats                    Hardware                HVAC controlled with 7 day thermostats                              Branches Energy conservation
                                                                                                                                                        Information Systems
                                                                              Current solution              Type of Solution                                Description                               Location(s)                    Purpose
                                                                    Power Generators                           Hardware      Generates electricity during power outages (Ultra low sulfur Diesel Fuel) HQ/OC Emergency power
                                                                    Energy Efficient PC's and Monitors         Hardware               Small Factor PC's and LCD Monitors (Energy Star OK)                 All     Energy conservation
                                                                                                                                                        Various Departments
                                                                              Current solution            Type of Solution                                  Description                         Location(s)                           Purpose
                                                                    Deposits via Scanner or Smartphone PC Deposit              Members able to deposit checks with Scanner or Smartphone's          All          Save on paper, transport and labor
                                                                    Electronic Archiving               Electronic file archive Scan to archive,Efax,email attachments vs. print or send forms     Various        Scan vs. store at Iron mtn. Save on transport
                                                                    Electronic Statements and forms Eforms and statements Members opt-in their electronics statements and forms                     All          Save on paper,transport,archiving and labor
                                                                    e-Loans application                Web Software            Members apply for loans electronically                               All          Save on paper,transport,archiving and labor
                                                                    Message Center                     Web Software            Members receive communication and promos from DCU                    All          Save on mailings(Paper),postage and labor.




                                                                                                                                                                                                                                                                     21 | P a g e
                                                                    Check 21                           Software                Check 21 captures the image of check and archives in house           All          Save on transport (fuel),archiving and info calls
                                                                    Member self serve                  Web Software            Members can view and make changes to their products and services     All          Save on mailings(Paper),postage and labor.
Addendum B – Solar Energy
A Brief History of Solar

Photovoltaics is the process of converting solar radiation into electrical power. In other
words, converting sunlight into electricity. Although many consider solar power a
relatively new and developing technology, the solar industry is more mature. The roots
of the technologies used in solar panels today date back to the 1940’s and 1950’s. In
1954, Bell Telephone laboratories successfully developed a solar cell that was able to
transform sunlight into electrical power with which to power electrical equipment—a
true breakthrough in solar technology (US DOE).

As application of solar as a practical and efficient energy source advanced, through the
1960’s and 1970’s photovoltaics were commonly used in the aerospace industry by
NASA, the communications industry in satellites, and in the shipping industry to power
lighthouses and warning lights on gas and oil rigs (ironically enough). Domestic uses for
solar energy were identified around this time as well. In 1973, the University of
Delaware constructed a house powered through photovoltaics, one of the first such
residences in America (US DOE).

http://www1.eere.energy.gov/solar/pdfs/solar_timeline.pdf

Environmental Case for Solar:

For the average person, one would not associate the electricity required to watch
television or power a light with greenhouse gas emissions. The traditional energy
means used to create electricity do however cause these negative impacts on the
environment. In fact electricity generation is perhaps the largest contributor to our
environmental footprint as humans.

In Massachusetts, natural gas, petroleum and coal are the predominant energy sources
used in electricity production. Natural gas accounted for 43.2% of electricity produced
in 2008, with petroleum at 23.1% and coal at 12.3% as reflected (see table 1).




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Table 1. Electric Power Industry Capability by Primary Energy Source, 1990 Through 2008 (Megawatts)

Massachusetts

                                                                                  % Share
                          Energy Source                                 2008        2008

Total Electric Industry                                                  13,505       100.0
    Coal                                                                  1,662        12.3
    Petroleum                                                             3,120        23.1
    Natural Gas                                                           5,839        43.2
    Nuclear                                                                 685          5.1
    Hydroelectric                                                           258          1.9
    Other Renewables                                                        299          2.2
    Pumped Storage                                                        1,643        12.2
* = Value is less than half of the smallest unit of measure
- (dash) = Data not available.
Source: U.S. Energy Information Administration, Form EIA-860, "Annual Electric Generator


Energy production used to develop electricity results in the emission of greenhouse
gases—carbon dioxide, sulfur dioxide, nitrogen oxide. During peak hours, to account for
the rising demand in electricity utilities are forced to produce electricity using the more
environmentally damaging forms of energy such as coal plants. While the burning of all
fossil fuels to produce electricity emits GHG’s, coal is clearly the most harmful. For
example, producing 1 megawatt of electricity with coal results in the emission of 6,000
metric tons of carbon dioxide in the atmosphere, compared with 592 and 1,560 metric
tons from petroleum and natural gas, respectively. To put that into perspective, an
average household uses 7.5 megawatts per year. The amount of greenhouse gas
emissions (CO2, SO2 and NO2) released into the air through the production of electricity
in Massachusetts during 2008 is listed in table 2. The emitting of sulfur dioxide and
nitrous oxide into the atmosphere leads to acid rain and smog respectively.




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Table 2. Electric Power Industry Emissions Estimates, 1990 Through 2008 (Thousand Metric Tons)

Massachusetts


                           Emission Type                                     2008

Sulfur Dioxide
    Coal                                                                             38
    Petroleum                                                                         6
    Natural Gas                                                                       *
    Other Renewables                                                                  *
    Other                                                                             *
    Total                                                                            44
Nitrogen Oxide
    Coal                                                                              8
    Petroleum                                                                         1
    Natural Gas                                                                       3
    Other Renewables                                                                  7
    Other                                                                             *
    Total                                                                            19
Carbon Dioxide
    Coal                                                                          9,963
    Petroleum                                                                     1,847
    Natural Gas                                                                   9,108
    Other Renewables                                                                  -
    Other                                                                         1,330
    Total                                                                        22,248
R = Revised.
* = Value is less than half of the smallest unit of measure
- (dash) = Data not available.
Source: Calculations made by the Electric Power Division, U. S. Energy Information


By contrast to the traditional forms of energy, production of electricity through solar
energy emits near zero harmful chemicals into the atmosphere. Emissions of carbon
dioxide, sulfur dioxide and nitrogen oxide are brought to zero through the use of solar
energy. Thus, using solar reduces ones impact on climate change, as well as their
contributions to acid rain and smog.

Given the electricity production levels of a typical 3kW solar energy system, over the 25
year life of the system a household could reduce the following emissions, and also save
90,000 pounds of coal from being burned:

       180,000 lbs of carbon dioxide (CO2)
       600 lbs of nitrous oxide (NOx)
       500 lbs of sulfur dioxide (SO2)

Alternatively, one DCU member that installs solar panels would cut carbon dioxide
emissions 7,200 lbs per year for twenty-five years, a very significant reduction. A recent
Bloomberg study has suggested that by 2020, 2.4% of households will be powered by
solar energy (http://www.cleanenergyauthority.com/solar-energy-news/study-shows-

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solar-growth-102710/).  Among DCU members alone, that would account for
approximately 7,000 households. The environmental savings of a transition to solar
energy for 7,000 DCU members per year would be:

       50.4 million lbs of CO2
       168,000 lbs of NOx
       140,000 lbs of SO2

The environmental benefits of solar panels are clear. Next we will identify the benefits
to the consumer; the DCU member.

The Consumer Benefit of Solar:

The cost benefit for consumers to invest in solar energy is multi-tiered, and government
subsidies promoting the development of clean energy further creates a benefit for
consumers.

Utilities cost reduction and net metering:
First and foremost, installation of solar panels will reduce your utility bill immediately.
Every minute of sunshine results in the production of electricity from the photovoltaic
system. Whatever electricity you are consuming residentially at a specific point in time
costs you nothing, as long as your generation exceeds usage.

Furthermore, through a process known as net metering, PV owners can actually make
their utility meter spin backwards. At times when solar production of electricity is
higher than usage, during the day for example, you actually can send electricity back to
the grid and essentially bank electricity for use during times of zero production
(nighttime).

The average cost for a kWh in Massachusetts in 2008 was $17.68. A 5kW system can
produce over 6,000 kWh per year—leading to a potential cost savings of $1,060 per
year. Given that the cost of generating electricity from conventional sources has
continued to rise (The McKinsey Quarterly), savings in future years are even greater.

SRECs:
Residents in Massachusetts in particular are further given an economic incentive to
invest in solar through the issuance of Solar Renewable Energy Certificates (SRECs) by
the Massachusetts Department of Energy (DOER).

Individuals with solar generating systems are given an SREC for each megawatt of
electricity produced. The SREC’s have economic value similar to a stock. The reason for
the value is that utility companies such as National Grid and NSTAR are mandated
through state law to produce a certain level of megawatts per year. The utility
companies do not have the capacity or funds to generate the electricity, and thus

25 | P a g e
purchase SREC‘s from individuals and other producers of solar kWh in order to avoid
paying fines.

The value of an SREC varies, but has a floor and a ceiling, providing consumers with a
specific range of return on investment. Currently in Massachusetts, the price ceiling is
$600 per SREC—which also represents the fine levied for failing to generate solar energy
or obtain 1 SREC. The price floor is $300 as established by the DOER’s Solar Credit
Clearinghouse.

For a consumer who installs a 5 kilowatt PV system, they will earn 6 SRECs per year,
earning them a guaranteed $1,800 per year with the potential of earning up to $3,600
depending on the market.

Government subsidies:
Admittedly, the main barrier for consumers to invest in solar panels is the upfront cost
for purchase and installation of the PV system. The government however is lowering
this cost through government subsidies at the state and federal level.

Under the Massachusetts Commonwealth Solar II Rebate Program, those who purchase
and install a PV system are given rebates diminishing the out of pocket upfront cost to
buyers. Residents would receive $1/watt capacity of the system, $.10 per watt for
purchasing a system with parts made in Massachusetts and an additional rebate of $1/
watt based on housing value. For a 5 kilowatt system, that would result in a $10,500
rebate.

The consumer benefit for solar panels is clear. On a yearly basis homeowners can save
money on their utilities, and minimize their risk of bearing the burden of increasing
electricity costs in the future. SREC’s provide a further benefit, acting as an annuity,
providing a consumer with a predictable cash flow based on their solar generation. The
government assistance helps offset the upfront cost, but not the entire cost. That is
where DCU can step into the picture and provide financing.

In facilitating the financing of solar panel installation DCU would help reduce the
environmental footprint of its members, serving an environmental benefit, and save
their members money, providing a huge social benefit. There is also an economic
benefit for DCU which we will explore next.

DCU’s Business Case for Solar

As for most capital investments such as solar, the largest barrier to entry is financing.
DCU can help their members remove that barrier. The business case for providing
financing is threefold. Through providing financing to members to install PV systems
DCU will increase their member base, generate loan revenue in a growing residential


26 | P a g e
lending market, and further their overall business vision of helping their members meet
their financial needs.

Consumer Demand
The residential demand for solar panels has seen unprecedented increase the past few
years, making solar lending a great space for a lending institution such as DCU to
expand.

Table 3 below reflects data produced by the U.S. Energy Information Administration that
confirms the increasing trend towards residential consumption of Solar/PV energy. In
the course of ten years, residential consumption of energy and electricity has nearly
doubled in the U.S. In Massachusetts in particular, installation of grid-connect PV
systems on residences doubled in 2009 (Interstate Renewable Energy Council, “US Solar
Market Trends 2009).

Table 3 Renewable Energy Consumption: Residential Sector


Year             Solar/PV Energy Consumed by the
                 Residential Sector
                 (Trillion Btu)
2000 Total                                            61.355
2001 Total                                            59.846
2002 Total                                            58.747
2003 Total                                            58.151
2004 Total                                            58.736
2005 Total                                            60.628
2006 Total                                            67.186
2007 Total                                            74.896
2008 Total                                             88.14
2009 Total                                             100.6

Source: U.S. Energy Information Administration

Demand for residential solar continues to rise with the cost of electricity. Since the year
2000, the average retail price for electricity across the U.S. has increase from 8.24 cents
per kWh to 11.55 cents (see table 4). That represents a near 40% increase. As the cost
of electricity continues to rise, consumers stand to gain more through investing in a PV
system, leading to an increased demand.




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Table 4 Average Retail Prices of Electricity


Year                                Average Retail Price of Electricity,
                                    Residential Sector
                                    (Cents per Kilowatthour Including
                                    Taxes)
2000 Average                                                         8.24
2001 Average                                                         8.58
2002 Average                                                         8.44
2003 Average                                                         8.72
2004 Average                                                         8.95
2005 Average                                                         9.45
2006 Average                                                         10.4
2007 Average                                                       10.65
2008 Average                                                       11.26
2009 Average                                                       11.55


Risk Mitigation

Above we detailed the economic benefits of SREC’s and how consumers can receive an
economic benefit from them. The SREC’s could also provide a guaranteed cash flow to a
company such as DCU, mitigating the risk of default on the loan. In a worst case
scenario where a member defaulted on the loan, DCU could have a direct claim on the
SREC’s produced by the PV system. The presence of SREC’s provides a built in insurance
for default, making solar lending an intelligent product.

Solar Lending and DCU’s Vision

DCU’s business is based on doing things the DCU way where people come first. Integral
parts of that vision are making a meaningful, positive difference in people’s lives. DCU
strives to help all members achieve their financial goals. Offering loans for residential
use of solar coincides with the DCU vision. DCU members would reduce energy costs on
an annual basis, furthering their financial goals. DCU would also be providing a vehicle
with which their members reduce their environmental footprint—a meaningful
difference in their lives and the community as a whole.




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Addendum C:
The Green Envelope –

For most Americans their home it their biggest asset, and their biggest liability. Investing
in improving the home’s energy efficiency can both add value to the home itself but also
decrease the cost associated with owning the home. Furthermore the generation of
electricity is a major contributor to environmental degradation and climate change, by
renovating homes to be more energy efficient homeowners can reduce the overall
carbon footprint as well as the overall energy costs associated with the home. The parts
of the home that are exposed to the elements are called the green envelope. The green
envelope includes: windows, doors, walls and floors.

While upgrading a home’s green envelope will save money, the exact dollar amount of
energy savings per month is dependent on how energy efficient the home was to start
with, the overall square footage of the home, and where the home is located. There are
two main reasons the New England area is a prime area to invest in retrofitting a home
to be more energy efficient. The first reason to upgrade is because there are a large
amount of homes that are old thus making them less energy efficient than newer
homes. Secondly, because New England is located in a region that has severe winters
homeowners can save a great deal in heating costs by improving energy efficiency.


Windows:




                                        blog.hobofarm.com
While there are many ways to increase energy efficiency often the easiest to remedy is
upgrading to more efficient energy Star approved windows. According to Energy Star a
New England homeowner can expect to save about $465 if upgrading from single-pane
windows, and about $91 if upgrading from double-pane windows.

According to a study conducted by Lawrence Berkeley National Laboratory, the energy
lost through inefficient residential windows accounts for 2% of total U.S. energy
consumption or 9% of total residential energy consumption. Many technological
improvements have been made during the last 30 years to increase the performance of
windows’ insulation, and are nowadays available and relatively inexpensive for most
residential applications.


29 | P a g e
High Performance Windows


 - Higher upfront cost but lower long-term costs
 - Increased comfort in summer and winter
 - Savings on heating and cooling costs
 - Less outside noise
 - Less fading from UV light
 - Less interior condensation



                                                   (http://www.homeworks.ca/blog)

                                                   Conventional Windows


                                                    -Lower upfront cost and higher long-term costs

                                                    -Less comfort in summer and winter
                                                    -More expensive heating and cooling costs
                                                    -High noise transmission
                                                    -Fading from UV light


(http://www.homeworks.ca/blog)




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www.energystar.gov/

Weather Proofing:

Another place to look for savings is weather proofing. Insuring that the home is keeping
as much heat or cool inside is essential in realizing energy savings. For example making
sure that the exterior doors have proper weather stripping can reduce the amount of
heat or cool that is escaping by about 11%, according to www.thebarrierinsulation.com.
Indeed, the better the insulation of a house is and the tighter its exterior seals are, the
lower the heating and cooling costs are. If a homeowner has solar panels they can
multiply their savings by ensuring that their home is properly weather sealed. In
addition to keeping the heat or cool in properly sealing a home can keep water and
humidity out, preventing mold and mildew to grow, which can have negative health
effects and can weakens the structure of the home. Overall, a sound thermal envelope
increases the health and comfort of the house occupants, while reducing their energy
bills and overall effect on the environment.




31 | P a g e
www.thebarrierinsulation.com/               www.precisionwindowsystems.com

In order to avoid the stuffiness due to tight home, household owners can either choose
between opening the windows periodically in order to air the house, or install an energy
recovery ventilation unit, which continuously circulates fresh air through the house.




32 | P a g e
        Insulation:                                           www.simplyrenewable.com

The roof is the most important part of a house to insulate. The insulation in roofs should
have a high “R” rating (minimum of R-30), the higher the R rating the more the
insulation will keep in. In the winter natural process of convection, heated air rising to
the roof can cause heat loss if the roof is not appropriately insulated. If the home has
high ceilings, it could be beneficial to install ceiling fans to better circulate air thought
the home. In the summer time, the sun beats directly on the roof, which accumulates
heat in the attic and radiates into the lower floors. A highly insulated roof will therefore
keep a house warm when the temperatures are low, and cool when the temperatures
rise.

Insolating the home’s floors and walls are also ways to save money on energy costs.
However the benefits of installing insulation under the floor are mainly realized in very
cold climates for example areas where the ground freezes. Unfortunately to insulate
exterior walls of homes that are already built is very expensive because it involves taking
off the existing wall’s surface to get between the studs.




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Addendum D – Energy Efficiency Mortgages

Boosting energy efficiency of American houses offers unequalled opportunities for
communities throughout the country. Indeed, there are almost 130 million homes
across the United States of America generating more than 20% of the nation’s carbon
dioxide emission, making them a significant contributor to global climate change.
According to Diana Farrell and Jaana K. Remes, technologies that the energy efficiency
of homes can reduce the energy use by up to 40% per home, as well as reducing the
associated greenhouse gas emissions by up to 160 million metric tons annually by the
year 2020, and the energy bill by $21 billion annually.1 Increasing houses’ energy
efficiency would therefore not only slow down the increase in carbon emissions from
power plants and fossil fuel combustion, but also stretch energy resources.

As most of people spend as much as two-thirds of their time at home, their
environmental footprint is largely determined by the efficiency of their residential
heating and cooling systems, as well as the resources they consume to keep their
houses up and running. Moreover, according to John Shipman, President and CEO of
Energy Efficiency Management, more than 70% of residential and non residential
buildings predate current energy efficiency standards, which leaves a wide area of
improvement and presents immense opportunities for the energy efficiency market.
Investments in energy-saving measures, including more efficient central heating and
cooling systems, energy-saving water heaters and less drafty windows can make a
difference.

However, capital constraints prevent many households from seizing these opportunities.
Indeed, even in developed economies which benefit from advanced mortgage markets,
people who have been granted with a loan for defined amounts often face trade-offs, as
the investments required to increase a house efficiency is often higher than a
homeowner’s budget. High upfront costs and a lack of credit and financing options
therefore dissuade many homeowners from completing or even considering energy
efficiency improvements in their houses. Insufficiency of information on these
possibilities also makes it hard for this market to thrive regardless of the opportunities
and advantages it offers. Some efforts have been made towards addressing these issues,
such as the Recovery Act which extended a 30% tax credit for investment in residential
energy efficiency property, up to a cap of $1,500 per primary residence over two years.
Nevertheless, this attempt has not succeeded in making significant inroads in the
market at a larger level.

Financial Institutions have therefore an important role to play in this picture, by
providing their members with more transparent, and accessible modes of financing, and
1
 http://www.midwestsustainable.com/pdf/Biden%20Plan.PDF Recovery Through Retrofit,
October 2009, Middle Class Task Force Council On Environmental Quality.
http://besustainable.pbworks.com/f/McKinsey+Quarterly_How+the+world+should+invest+in+ener
gy+efficiency.pdf

34 | P a g e
by marketing those options to them. Improving the energy efficiency of the U.S. housing
stock as well as developing financing possibilities can result in significant benefits for
different actors within the economy, as well as the environment.

The use of Energy Efficiency Mortgages, which give the opportunity to finance cost-
effective measures as part of a single mortgage and stretch debt-to-income qualifying
ratios on loans, have therefore gained momentum across the nation. Indeed, they
present a great vehicle and have a significant potential of making the housing
marketplace more environmentally friendly, as well as inducing consequential money
savings that could be invested in productive projects otherwise.

History

First introduced in 1979 when President Carter ordered all federal lending agencies to
institute programs encouraging energy efficiency, EEM’s have been idling in relative
obscurity for its first two decades due to significant barriers to their widespread
utilisation. First of all, EEM’s required back then a complex registration process and
extensive paperwork which dissuaded people from applying for them. Moreover, the
access to the information was limited, and consumers could not get hold of
straightforward, understandable and reliable facts and figures on the investments
required and possible savings. Finally, the access to skilled workers was limited, which
made the implementation to energy efficiency programs such as the green envelope
insulting system or solar panels hard to become a reality on a national scale.

Efforts were however still being made by the government towards a more
environmentally friendly housing stock: in 1992, Congress mandated a pilot
demonstration of Energy Efficient Mortgages (EEM’s) in five states, and by 1995, the
pilot was expanded as a national program in order to increase its use across the USA.
Furthermore, the process to qualify for an EEM has become easier for applicants over
time. Indeed, the ratings’ results assessing a house energy efficiency are now made
available on a single sheet of paper, and lenders can quickly incorporate the findings
into a loan package they know will be backed by Fannie Mae.

Process to qualify for an EEM

EEMs are sponsored by three actors: federally insured mortgage programs, the Federal
Housing Administration (FHA), and the Veteran’s Administration (VA), and the
conventional secondary mortgage market (Fannie Mae and Freddie Mac). Lenders can
therefore offer conventional EEMs, FHA EEMs, or VA EEMs.

To qualify for an EEM, potential applicant must first hire a certified Home Energy Rater
to inspect and evaluate the home’s energy features, prepare a home energy rating, also
called «green» rating, and estimates the cost of the improvements as well as expected
energy savings. The rater determines how tight and well insulated the dwelling is by

35 | P a g e
examining it from floor to ceiling for leaks and cracks, which will in turn give the home’s
efficiency rating. Such factors as window efficiency, heating and cooling system
efficiency, wall-to-window ratios, insulation levels, local climate and the solar
orientation of the home determine a home's HERS rating. In order to evaluate the
potential savings (Energy Savings Value) from the upgrade through time, the Rater
needs to estimate the cost of electricity and natural gas in the future. As energy
resources become less available, prices are expected to skyrocket, which makes the
savings increase through time. While Home Energy Rating System’s inspections can cost
as much as $400, the energy efficiency are considered part of the borrower’s income
and can help homebuyer qualify for larger mortgages. The cost of the energy
improvements can be included in the homeowner's mortgage; however, the
improvements cannot exceed 15 percent of the home's value.

New homeowners can qualify for an EEM if the house was built according to the
guidelines set by the Energy Star Builder Option Program (BOP), a project of the U.S.
Environmental Protection Agency (EPA) to encourage energy-efficient design and
building. Once construction on the new home is complete, a HERS report is conducted
to determine the building's energy efficiency, which will in turn dictate the terms of the
EEM. Eligible borrowers can obtain an EEM backed by Fannie Mae with only a three
percent contribution.




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          Addendum E Preliminary DCU Sustainability Event Plan

DCU Sustainability Seminar Event Plan

Name of event
                                                   DCU Sustainability Seminar


Date of event
                                                   3/1/2011

Time of event
                                                   3:00 PM

Location of event
                                                   Clark University – Tilton Hall


Event coordinator/contact person
                                                   Adam Brissette, Fadwa Jaouane, Tallis
                                                   Salamatian
Target audience –
                                                   DCU members, general public (perspective
                                                   DCU members)

Objectives –                                             Educate homeowners of benefits of
.                                                         sustainability
                                                         Make DCU members and perspective
                                                          members aware of different home
                                                          energy solutions
                                                         Create awareness of DCU green
                                                          lending initiatives
                                                         Connect Green Lending to DCU’s
                                                          vision
                                                         Attract new customers
                                                         Branding for DCU

Event Description
                                                   The event is an educational opportunity for
                                                   homeowners, both DCU members and
                                                   perspective members. Through bringing
                                                   together multiple professionals from the
                                                   sustainability field to discuss energy usage,
                                                   the audience will receive valuable
                                                   information. The audience will leave the
                                                   seminar aware of beneficial cost saving
                                                   home energy solutions, and aware that DCU
                                                   provides financing for these solutions.


          Timeline (Speakers and Topics)
          Speakers:
          For an Weekend Day Event

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3:00 Doors open

3:30-3:50 (Confirmed)
Will O’Brien: Professor at Clark University and seasoned consultant. Professor O’Brien
will give an introduction to the topic of sustainability and how individual homeowners
can make an impact in greening the community.

4:05-4:20 (Confirmed)
Bill Pratt: National Grid executive will discuss the new “Smart Grid” that is being
implemented in the North East. Mr. Pratt will also discuss where the energy in their
homes comes from and how consumer choices effect the environment.

4:35-4:50 (Tentatively Confirmed)
Energy Star: A representative from Energy Star will give a presentation on why energy
efficiency is important and give examples of best practices.

5:05-5:20
Architect / Home Depot: Home Depot will give a short description of products that they
offer that can save homeowners money and limit their environmental footprint.

5:35-5:50
Solar Power: A representative from the solar power industry will give a presentation on
why solar panels are a good investment and how a “Smart Grid” can make savings even
more viable.

6:05-6:30
DCU: DCU will give the keynote speech at the seminar highlighting how the new Green
Lending initiatives will allow homeowners to upgrade their homes to be more
sustainable.




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