As the world grapples with the pressing challenges of climate change, a deepening relationship between finance and environmental action is more critical than ever. During Climate Week NYC 2024, CDP and America Is All In convened financial institutions, green banks, community development financial institutions (CDFIs) and other key partners for a focused roundtable discussion on the transformative potential of the Greenhouse Gas Reduction Fund (GGRF). This $27 billion investment from the Inflation Reduction Act (IRA), launched in summer 2024 aims to mobilize financing and private capital to address the climate crisis while revitalizing underserved communities.
At the heart of these discussions were strategies to address the challenges and opportunities that entities face in identifying effective collaborative approaches, securing high-impact investments and maximizing community benefits by leveraging the GGRF’s Clean Communities Investment Accelerator (CCIA) and National Clean Investment Fund (NCIF). Based on the discussion, the following are five key takeaways from the event with a focus on the role of green banks.
What is the role of Green Banks in deploying the GGRF under the IRA?
Green banks serve state and local climate communities across the United States, offering specialty financing tools to catalyze greenhouse gas reduction projects like underwriting residential solar and energy efficiency upgrades. During the panel discussion, Maryrose Myrtetus, Executive Director of the Philadelphia Green Capital Corporation discussed their place-based approach, which builds on best practices of other green banks while mobilizing capital from diverse sources – public, private and philanthropic. With their ability to crowd in private capital and target local projects, green banks are essential in scaling clean energy investments under the IRA.
For example, solar adoption is on the rise in Connecticut, with Connecticut Green Bank playing a key role by offering residents no-money-down, low-interest loans for home energy projects like solar panels. Bert Hunter, Chief Investment Officer at Connecticut Green Bank, shared that since its founding in 2011, the bank’s investments have helped prevent the emissions of 11 million tonnes of carbon dioxide.
Participants also discussed the recent announcement that the nation’s leading green banks, which collectively generate over $10 billion in new investments last year, have formed the U.S. Green Bank 50 (GB 50). This historic partnership between clean energy-focused public and nonprofit financial institutions further underscores the growing need for collective action to address climate-related risks and accelerate the clean energy transition.
How are Green Banks prioritizing social equity benefits through the IRA?
The IRA presents a unique opportunity to drive social equity by advancing economic and health benefits for historically marginalized communities, disproportionately impacted by climate change. Chanell Scott Contreras, President and CEO at Michigan Saves, emphasized her organization’s commitment to addressing climate change and racial and social equity as the state’s first nonprofit green bank. Michigan Saves launched the Bridge Financing program to help overcome the barrier of upfront project cost, enabling organizations to invest in solar array, electric fleet vehicles and geothermal systems – projects they might otherwise not have been able to pursue. Making this sort of financing available to small businesses and community organizations is pivotal in uplifting a broader segment of society through growth and quality employment opportunities and reinforces environmental equity.
What role can traditional banks play to support the IRA?
Emily Robichaux, Director of Climate Partnership Lending at Amalgamated Bank spoke about the role of financial institutions in respect to GGRF deployment. Banks such as Amalgamated and other traditional Wall Street banks, play an important role in IRA deployment by providing additional capital to projects. A lending facility such as a green bank can help de-risk much greater sums of project finance by stepping in to make the additional “bedrock” loan in a project. This promotes greater confidence and helps make other banks, like Amalgamated, more comfortable to step in and supply additional capital needed to complete a project. This sort of co-financing also then frees up more capital to be available that non-traditional lenders such as green banks would be able to leverage on their own. In this way, banks like Amalgamated Bank play a crucial role in amplifying IRA funding to much greater impact.
How do Credit Unions and Community Development Financial Institutions support the GGRF?
Credit unions and Community Development Financial Institutions are essential in expanding access to green financing for underserved communities and have a significant role to play with the roll-out of the Greenhouse Gas Reduction Fund. Jesse Gerstin, Vice President for the Center for Resiliency and Clean Energy at Inclusiv, provided an overview of how credit unions serve communities across the US. Jesse outlined Inclusiv’s plans to deploy a $1.87 billion federal award to provide grants to credit unions, enabling them to implement green lending programs aimed at low-income and disadvantaged communities (LIDACs). Around 300-400 credit unions will receive grants ranging from $275,000 to $11 million to fund green programs like solar, electrification, energy efficiency, and other clean energy technologies. Jesse also stressed the high demand for training programs, particularly in communities facing affordability challenges and rising energy costs, highlighting the need for a skilled workforce ready to support the transition to a green economy.
In what ways are America Is All In and CDP collaborating with Green Banks?
America Is All In is the largest coalition of climate leaders in the United States, representing roughly 74% of U.S. GDP and 63% of the U.S. population. America Is All In members collaborate to accelerate coordinated climate action, such as supporting state and local leaders in best utilizing federal resources through partnership with green banks. America Is All In also develops virtual and in-person training opportunities for members on a variety of key current topics across climate action, environmental justice and climate finance.
CDP runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts. CDP works with more than 700 financial institutions representing $USD130 trillion in assets, providing data to inform investment decisions, support sustainability targets and channel capital toward sustainable finance. According to CDP’s US Infrastructure Snapshot in 2023, over 160 US cities and six states, representing more than 25% of the US population, reported on climate risks, actions and financing needs. 130 U.S. cities disclosed a need for $27 billion in investment, focusing primarily on transportation and renewable energy, buildings and energy efficiency. While these funding gaps are just a segment of the overall need, this pipeline from U.S. cities can be leveraged to support the goals of green banks and financial institutions by enhancing their underwriting practices, supporting clean energy projects and attracting capital. To learn more about the pivotal role of green banks in driving the clean energy transition, join CDP on November 12 11:00AM EDT for a webinar session.