US starts ‘green bank’ to finance community climate projects

By Jean Chemnick | 04/04/2024 06:47 AM EDT

Eight nonprofits will distribute $20 billion in federal cash for solar installations, electric delivery vans and multifamily housing weatherization.

EPA Administrator Michael Regan speaks on Capitol Hill.

EPA Administrator Michael Regan speaks on Capitol Hill on Sept. 27, 2023, in Washington. EPA will distribute $20 billion to nonprofits under the Inflation Reduction Act's biggest grant program. Mark Schiefelbein/AP

The Biden administration announced recipients of the climate law’s biggest grant program Thursday, kicking off a $20 billion effort to transform community lending and green the U.S. economy.

EPA will award eight initial grants under the Greenhouse Gas Reduction Fund, ranging in size from $400 million to almost $7 billion. The largest award will go to Climate United, a partnership that includes a nonprofit impact investment firm and two affordable housing lenders.

A senior administration official told reporters Wednesday that the EPA finance program would “create a first-of-its-kind national network of clean technology financing institutions that will finance tens of thousands of climate and clean energy projects in the years to come.”


“And just as important, this national network would deliver capital to communities that are too often left behind,” the official added on the call, which the White House held for reporters on the condition that officials would remain anonymous.

The White House estimates the program will reduce or avoid 40 million metric tons of carbon dioxide per year and mobilize $7 in private investment for every $1 of taxpayer money spent, according to the administration official. The official said that 70 percent of the program’s overall benefits will flow to low-income communities.

Vice President Kamala Harris and EPA Administrator Michael Regan will announce the awards at a Charlotte, North Carolina, event Thursday. They will meet a homeowner in a historically Black neighborhood who worked with Self-Help, one of the affordable housing lenders partnering on Climate United, to improve their home’s energy efficiency and lower utility bills, officials said.

EPA chose three nonprofits — Climate United, Coalition for Green Capital and Power Forward Communities — to distribute a total of $14 billion in capital to finance projects like community and residential solar installations, electric delivery vans and energy-efficient multifamily housing. The agency will also award five grants, totaling $6 billion, aimed at building green lending capacity at nonprofit community development financial institutions (CDFIs) and credit unions that already serve disadvantaged communities.

The capital EPA hands off to those nonprofits will be disbursed to a broader universe of nonprofit lending institutions over the seven-year life of the program. EPA hopes the program will irrevocably change the way such institutions approach lending for distributed power, electric transportation and energy-efficient buildings.

The program may benefit some of the larger clean energy projects that big green banks have historically focused on. But the administration is directing most of the program’s resources toward CDFIs and credit unions that serve low- and moderate-income communities in cities and rural America.

That suggests a larger share of the capital might be deployed for consumer or small business loans, rather than utility-scale clean energy projects.

“These community lenders are the backbone in many communities of access to capital, and providing those institutions with capitalization to begin lending into the clean space only means that more American families will have access to these cost-effective, air pollution-reducing technologies,” a senior administration official told reporters Wednesday.

The official added that only projects that lack access to capital now would be eligible for loans under the program — a bar that commercial renewable energy projects, for example, might find difficult to clear.

EPA will distribute the $20 billion under two competitions: the National Clean Investment Fund (NCIF) and the Clean Communities Investment Accelerator (CCIA).

Climate United — the largest recipient under the NCIF competition — will focus on economic opportunity and environmental sustainability in low-income disadvantaged communities, according to those briefed on EPA’s plans. The group is a partnership between global impact investor Calvert Impact Capital and CDFIs Community Preservation Corp. and Self-Help.

Coalition for Green Capital, which represents state and local green banks, will get $5 billion under the NCIF competition to capitalize green banks and finance qualified projects. Power Forward Communities — which includes electrification nonprofit Rewiring America, national affordable housing backers Enterprise Community Partners and LISC as well as housing charities — will receive $2 billion to focus on housing.

EPA will also make five awards under the $6 billion CCIA program. Those grants range from $2.3 billion for the Opportunity Finance Network — a CDFI intermediary — down to $400 million for the Native CDFI Network, which supports nonprofit Native American lenders on reservations and in cities. CDFI Appalachian Community Capital, CDFI intermediary Inclusiv and nonprofit Justice Climate Fund will also receive grants under the program.

‘A really good start’

The awards have been a closely guarded secret — even from the selected applicants. Beth Bafford, Climate United’s CEO, said her group only received formal notice that they would get an award Sunday night and didn’t know the grant amount until late Wednesday.

But Bafford said she and her team have spent the last few months on outreach and solidifying a pipeline of partner organizations and projects.

“We basically made the decision internally that we were going to prepare as if we are getting an award,”she said. ‘We knew we had to start running in order to be prepared for this moment.”

Bafford said Climate United expects to begin disbursing money before the end of the calendar year. But she said it will need to adjust its implementation plans to account for the award size. It applied for the full $14 billion under the NCIF.

While Power Forward Partners will focus on housing, Climate United may work in that space as well. The Greenhouse Gas Reduction Fund is the largest investment the Inflation Reduction Act made in building decarbonization, and EPA identified that as one of the program’s central priorities.

Climate United hopes to spur lenders to make loans for carbon-cutting upgrades like electric appliances, heat pumps and vehicle charging when they originate mortgages for houses, apartment complexes and office buildings.

“There are trillions of dollars of mortgages originated every year,” Bafford said in a recent interview. “If you don’t incorporate deep decarbonization investments through that process, we are never going to get to decarbonization at the scale that we need to actually make a dent in our buildings emissions.”

Reed Hundt, CEO of Coalition for Green Capital and a longtime advocate for green banks, noted that three-quarters of the program’s resources would be granted to community lending coalitions.

Hundt called CGC’s $5 billion capitalization for green banks “a really good start.”

“We’re going to need a lot more money even to make a dent in our pipeline,” he said. CGC has $30 billion worth of projects and investment opportunities lined up, Hundt said — more than half in low-income communities.

CGC aims to show strong results and seek more funding.

“Good investing attracts more investing,” Hundt said.

Douglass Sims, interim CEO at Justice Climate Fund, said the nonprofit has developed course work on green lending and will design customized programs to support individual CDFIs and credit unions. Justice Climate Fund — an unsuccessful NCIF applicant — received $940 million under CCIA.

The CCIA funds can be used to help community lenders hire staff with expertise in areas like solar financing, building efficiency or electric vehicle infrastructure. And community lenders that join the program can also access capital to make loans in those areas.

“We know that these lenders are already lending in communities, and they have a long track record of doing so, so it’s really about what do they need to be more effective,” Sims said.