Large-scale green banking: boosting climate action

As world leaders and other stakeholders gathered in New York for Climate Week, and the city came alive with excitement over the recent passage of the Climate Act, it was important to remember the role of green banks and other institutions that will do the work on the ground that ensures the goals of the new law are met and that the United States meets its climate goals.

Green Bank Network Member Panel with Green Banks from New York, Connecticut, DC and Rhode Island

The climate law, officially titled the Reducing Inflation Act, will make substantial investments through its Greenhouse Gas Reduction Fund. To ensure that funding has the desired impact, it is essential to identify the right institutions to distribute these public funds and the best organizations to partner with. This is where green banks can help. Green banks respond to a critical market need by providing low-cost capital and innovative financing structures that help finance the development of technologies and infrastructure to address the climate challenge.

During Climate Week, the NRDC and the Green Bank Network (GBN) hosted an event that included keynote addresses from Senator Ed Markey and Representative Debbie Dingell, two longtime supporters of a national US green bank which can mobilize public and private funds to invest in clean energy and infrastructure. The event highlighted the potential impact of the Climate Act’s Greenhouse Gas Reduction Fund to spur investment in disadvantaged communities and grow the nascent green sectors that are needed to meet our climate goals. He also highlighted the success of local green banks in using public funds to mobilize private investment in projects that drive economic growth, improve the health and well-being of local communities and reduce gas emissions. greenhouse, including in low-income and marginalized communities.

Historic climate action to achieve environmental justice goals

The two keynote speakers discussed the Cut Inflation Act, which is expected to reduce greenhouse gas pollution by 41% below 2005 levels by 2030. The new law allocates 27 billion dollars towards the creation of the Greenhouse Gas Reduction Fund, more than half of which is dedicated to advancing clean energy, resilient infrastructure and energy-efficient buildings in low-income and disadvantaged communities.

Rep. Dingell pointed out that this fund and the IRA more broadly mark “the largest investment in clean energy, environmental justice, and climate action in American history.” Senator Markey noted that the new Fund enables the creation of a national climate bank, which “would establish the United States as a world leader in addressing the causes and effects of climate change and maximize greenhouse gas emissions reductions.” greenhouse effect per public dollar deployed”. Markey described his vision for a national climate bank with the ability to “rapidly deploy mature technologies while commercializing and developing new technologies and investing directly in projects that reduce emissions, as well as providing financing and technical assistance to eligible regional and local green banks. .”

Green banks drive climate action in their local communities

To understand the impact these funds can have on our economy and communities, we can look at how existing green banks in the United States are using public funds to advance investments in clean energy and other green sectors. The new Greenhouse Gas Reduction Fund has the potential to help green banks (as well as community development financial institutions, minority deposit-taking institutions and other community lenders like credit unions) increase their ability to fulfill their green mandates and leverage private investment, especially in underserved communities. Event attendees highlighted some of the ways their institutions are working with local developers and entrepreneurs to drive green investments in local communities.

  • Gregory Randolph, Managing Director of NY Green Bank (NYGB), described how the green bank helped scale Ecosave, a company providing deep energy retrofits, renewable energy generation and energy storage services that reduce carbon emissions in the built environment. Ecosave CEO Marcelo Rouco explained that the company needed access to a funding facility considered too small for large banks and too large for community lenders. NYGB stepped in to fill this gap by providing an innovative transaction structure that allowed Ecosave to expand its operations in the state and beyond. It is important to note that the green bank will be able to replicate the model to help develop other small and medium enterprises offering clean energy services.
  • DC Green Bank (DCGB) has a facility to support solar power in low-income housing that is not tied to credit, helping to expand access to clean energy. The green bank also works to build the capacity of local entrepreneurs and developers who want to impact green space, but who may lack an audited financial track record sufficient to secure financing from traditional sources, explained DCGB CEO Eli Hopper. This focus on local business growth benefits both the climate and the local economy.
  • Projects implemented by the Rhode Island Infrastructure Bank have saved approximately $140 million in reduced energy costs for small businesses and municipalities in Rhode Island. This money improves the bottom line of local small businesses and nonprofits and allows municipalities to deploy taxpayer funds in other priorities. A project described by RIIB CEO Jeffrey Diehl provided an energy upgrade to a local school in an underserved community, saving the district $150,000 in energy costs each year that the school board could then spend on other priorities. such as teachers and other school improvements.
  • Connecticut Green Bank (CGB) has developed a working relationship as a lender for Posigen Solar through its Solar For All program to provide solar installation to low-income communities in Connecticut. According to Bert Hunter, executive vice president and CIO of CGB, this has transformed Connecticut from a state where most solar power benefited high-income residents to a state that now has an equal or slightly higher among low-income communities than middle-high income communities.

Implementation to advance environmental justice is key

The dollars provided by the new climate law provide an important level of stability and political direction. Sarah Davidson, director of strategy, impact and investor relations at NY Green Bank, pointed out that deploying hundreds of billions of dollars in clean energy infrastructure in the United States would send a strong signal. to the market (and the world) after years of inconsistent climate policy. By providing federal funding to support climate action in disadvantaged communities, the new law may lead to “overloaded activity” over the next few years and new private investments in climate infrastructure that meet both the goals of reduction of emissions and environmental equity. This will help advance projects such as community solar power for low-income communities, as well as expand green bank activities into new program areas such as electric vehicles.

To ensure that the Greenhouse Gas Fund is implemented appropriately, it is essential to clearly define which communities can benefit from it, to prioritize racial equity and to align with the existing complementary federal programs. With proper implementation and increasing the capacity of local green banks, as well as other longstanding institutions such as community development financial institutions, credit unions and minority depository institutions, the Reduction Fund can help provide low-income and disadvantaged communities with flexible and adaptive capital with the right conditions, education and technical assistance, and targeted and equitable projects that respond to community priorities.

At NRDC, we will continue to work with various partners and coalitions to help ensure the success of the new Greenhouse Gas Reduction Fund in advancing climate action and environmental justice.

This blog was written with Peter Trousdale, a consultant at the NRDC Green Finance Center. His work focuses on expanding the green banking model through capacity building programs such as the Green Bank Network (GBN). He previously worked with the Climate Finance team at NRDC’s Beijing office.