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Author:  Jeff St. John      Published: 4/8/2024  Canary Media

The program will not only fund billions of dollars worth of climate projects in these communities, but try and convince private investors to join in, too.

Workers install solar panels on a rooftop

How can $20 billion in federal funding unleash hundreds of billions of dollars in private-sector financing for clean energy, transportation and housing — and expand access to all of those things for disadvantaged communities across the country?

Jessie Buendia, vice president of sustainability for nonprofit Dream.org, has spent the past year and a half working with environmental justice groups and clean investment experts to come up with ideas for how to accomplish that. This week, as part of the Inflation Reduction Act’s green bank program, the coalition Buendia works with got the money to start putting those ideas into practice.

On Thursday, the Biden administration named eight groups that will receive a total of $20 billion in funding from the Greenhouse Gas Reduction Fund, the official name for the green bank program. The structure is largely modeled after the green banks that now operate in 17 states — government-backed and nonprofit entities that offer low-cost loans and other financial support for rooftop solar, efficiency retrofits, electric heat pumps, EV charging and other carbon and pollution-reducing projects, with a focus on low-income and disadvantaged communities.

The biggest winners of the federal green bank program may be the residents of low-income and disadvantaged communities, who people like Buendia can now more easily help access clean energy and other climate-focused upgrades. The Environmental Protection Agency, which administers the program, has set requirements for green bank fund administrators to dedicate 70 percent of the capital, or more than $14 billion, toward these communities.

These requirements have been built into the agreements between the EPA and the groups receiving the funding, Buendia noted. ​It’s a win for democracy and oversight for government watchdogs like us,” she said. ​We’ll be able to hold the EPA accountable to delivering the projects and jobs we want to see.”

Of the $20 billion awarded Thursday, $5 billion will go to the entity Buendia is working with — the Coalition for Green Capital. The coalition is made up of state and local green banks and environmental advocacy groups like the one Buendia is national director of, called Green For All.

The Greenhouse Gas Reduction Fund represents ​a historic opportunity to create an inclusive green economy,” Buendia said — ​one built around the principles of greenlining rather than redlining.”

Redlining is the discriminatory practice of refusing to lend to residents of non-white communities — a practice that has been baked into government policy and private-sector practice since the New Deal. Greenlining refers to reversing that discrimination by offering loans with more forgiving terms in historically excluded communities.

Today that task is taken on by the more than 1,200 nonprofit community development financial institutions (CDFIs) that have been certified by the U.S. Treasury Department to work in underserved communities, as well as other ​local trusted lending partners in communities that are the most impoverished and most polluted,” Buendia said. But ​community development lenders who have expertise in working with disadvantaged communities lack expertise in green lending,” she said.

That’s where green banks can come in, partnering with communities to provide not only much-needed capital to build crucial climate and clean energy infrastructure, but the expertise and experience needed to make those investments pay off.

The green bank multiplier effect

Green banks focus on clean energy and climate projects that they see as promising targets for private-sector lending, but which lack the track record to convince conventional lenders to invest.

Since the first green bank opened in Connecticut in 2011, that process of making loans, getting them paid back, and then using those success stories to draw in private-sector lenders has successfully enabled $21.8 billion in public-private investment to date, according to data shared by Coalition for Green Capital in January — the majority of it from private-sector lenders.

The EPA has set a goal of achieving a ​private capital mobilization ratio” of seven-to-one for the $20 billion in public funds, equating to a total of $150 billion of public and private investment. In an April 2023 analysis, consultancy McKinsey forecasted that the program could ​mobilize more than 12 times the GHGRF’s public investment over ten years,” or up to $250 billion in private-sector investment.

That would be a welcome outcome: Demand for climate and clean energy financing well exceeds the $20 billion available from the EPA program, said Reed Hundt, co-founder and CEO of the Coalition for Green Capital. Hundt, the former U.S. Federal Communications Commission chair under the Clinton administration, was one of the earliest champions of the green bank concept.

Green banks in the coalition currently have ​a $30 billion pipeline” of projects they’ve vetted and would like to finance, Hundt told Canary Media. The $5 billion the coalition received ​isn’t going to make a big dent in the pipeline. But we’ll be able to skim the cream in that pipeline and get this money to work.”

Who is in charge of the green bank funds?

The EPA picked groups to manage two separate sets of funds that fall under the new federal green bank umbrella. The first is the National Clean Investment Fund (NCIF), a $14 billion program that requires the funds to adhere to the Biden administration’s Justice40 Initiative, its pledge to direct 40 percent of federal climate-related funds to historically disadvantaged communities.

All three of the awardees for this program have pledged to exceed the Justice40 requirement in their lending. Besides the Coalition for Green Capital-led group that was awarded $5 billion, the EPA picked two other consortiums out of at least five competing for the funding.

The largest amount — $7 billion — was awarded to Climate United, a partnership between investment firm Calvert Impact, multifamily affordable housing financier Community Preservation Corp. and community development financial institution Self-Help.

Climate United stated in a Thursday press release that it has committed to deploy at least 60 percent of funds in low-income and disadvantaged communities, at least 20 percent in rural communities and at least 10 percent in Native communities.

The third award of $2 billion was won by Power Forward Communities, a partnership led by pro-electrification nonprofit Rewiring America, community development financial institution Enterprise Community Partners, Habitat for Humanity, the Local Initiatives Support Corporation (LISC), and United Way. The partners plan to provide financing to homeowners and apartment building owners to upgrade appliances, weatherize homes, and make them more energy efficient and less expensive to operate.

EPA also announced awards for the $6 billion Clean Communities Investment Accelerator (CCIA), a fund structured to supply community lenders such as CDFIs and credit unions with funding and technical support for sustainable infrastructure projects. This fund is meant to be directed entirely to low-income and disadvantaged communities, and was organized by the EPA to meet demands from community financing institutions that green bank funds be more widely disbursed, rather than given to a handful of nationwide organizations.