For decades we’ve been led to believe that donating money is the only way to financially support a nonprofit organization committed to a mission we care about. However, what if there was a different way to support nonprofits that could also provide a modest financial return?
Perhaps the biggest challenge for nonprofits that want to install solar energy systems is that a variety of tax laws have created a perverse disincentive where donations to buy solar panels actually hurt the nonprofit. Since renewable energy projects are incentivized through the tax code, every dollar donated to a tax-exempt organization in support of a solar project immediately suffers a tax consequence that cuts the value of the donation nearly in half.
There’s a better alternative. Instead of asking for donations, San Diego-based CollectiveSun, a company I founded, has created a platform that allows community investors to fund the purchase of a photovoltaic solar system and facilitate a Power Purchase Agreement (PPA) with their favorite nonprofit. Payments on the energy sold under the PPA are then used to repay the investors with annual principal and interest payments. The community investors make money, the nonprofit saves money, and the planet benefits from a reduced environmental impact. It’s a triple-win.
This community-funded model allows individuals to stand up for their nonprofit in a market that has been underserved by traditional financing institutions. It’s the ultimate platform for investing in local nonprofits and causes that you are personally passionate about.
Is it philanthropy or is it investing? The answer is both, or what is being coined “Impact Investing.” CollectiveSun represents a new pathway for socially responsible investors to connect and engage with their favorite nonprofits. It allows them to put their funds to work knowing that every dollar invested will produce significant utility cost savings for the nonprofit they care about. Such a financial vehicle is particularly attractive to moderate income benefactors who may not be in a financial position to make large donations, but could participate in an investment that provides a modest return.
Nonprofits also like Impact Investing because they recognize that benefactors are growing increasingly weary of continual requests for hand-outs. In addition, asking for an investment is a very different proposition than asking for a donation. Impact Investing campaigns don’t cannibalize other giving programs because the investment campaign is not soliciting donations. The typical participant is somebody who supports a particular nonprofit, but may be on the “margin” in terms of engagement. Participating in an investment helps to increase that engagement.
Nonprofits are the backbone of our community. They provide houses of worship, educate our children, and deliver vital services to the most vulnerable among us. These are the organizations that we should be going out of our way to help. There’s a parable that says if you give a man a fish, he eats for a day, but if you teach a man to fish, he eats for a lifetime. Rather than donating money in an endless cycle to pay for electricity bills, why not provide investment dollars to enable your favorite nonprofit to become energy self-sufficient?
CollectiveSun enables nonprofits to enjoy the benefits of renewable energy by leveraging the power of their collective communities. It truly is power by the people.
Lee Barken, CPA, LEED-AP is the chief community officer at CollectiveSun. He can be reached at firstname.lastname@example.org. He is a certified public accountant, and serves on the board of CleanTech San Diego and other nonprofit boards.
This article originally appeared at XConomy.