How infrastructure leverages green banks


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Quick, what do Alaska, Maine and South Carolina have in common?

The three US states are seriously evaluating the creation of green banks – finance institutions created with the explicit mission of combining public and private funds to invest in climate solutions and green infrastructure. They would join around 20 other U.S. jurisdictions that have used this mechanism to generate more than $ 5 billion in clean energy investments by the end of 2019, including Connecticut, Florida, Michigan, and Washington, DC.

Alaska is so invested in the idea that Republican Don Young, a Republican who championed Deb Haaland’s nomination for Home Secretary, has once again crossed the aisle to become co-sponsor of the latest legislation to create a green bank at the national level. The bill would make $ 100 billion in public funds available for a nonprofit that would provide funding and other support to regional, state and local green banks – an amount that the sponsors say could catalyze $ 884 billion. dollars in green infrastructure investments over the next decade and help create 4 million jobs in a clean economy over the next four years.

The proposed objective of this public-private money: renewable energies; Energy storage; transport; resilience measures; Efficiency; reforestation; Agriculture; and industrial decarbonization.

The national focus on green and resilient infrastructure is stimulating local interest in projects such as electric vehicle charging infrastructure and micro-grids.

“Building on the proven success of state-level green banks, the Clean Energy and Sustainability Accelerator will transform our fight against climate change and intentionally spur investments in environmental justice communities,” said the co-sponsor Debbie Dingell, who represents Michigan, home of one of the oldest green non-profit banks, Michigan Saves. “This accelerator can bridge partisan divisions and unite the public and private sectors around our common goal of decarbonizing our country, creating jobs and leaving this world a better place than we found it.”

30 to 1

Even before the latest national green bank proposal – and despite the economic pause precipitated by the COVID-19 pandemic – U.S. and international interest in green banks was on the rise. The model works by leveraging public money to help stimulate private sector investment, for example through loan loss reserves, credit guarantees or consolidation arrangements. Among other things, it makes small projects more attractive to commercial banks, leasing companies, credit unions and other traditional lenders. The investment ratio varies considerably. According to RMI research, from $ 2 of private sector money is invested for every public dollar invested – up to a 30: 1 ratio between private sector funding and public sector funding. (The latest report from the nonprofit follows activity through mid-2020.)

“We are very happy to see over 20 countries interested in this model,” said Angela Whitney, director and co-director of the Green Bank Design Platform for RMI. “We see it as an institutional solution to help companies achieve their climate ambition. It turns political ambitions into projects on the ground.”

In the second and third quarters of 2020, for example, NY Green Bank committed $ 166 million to 16 new projects such as wind farms for community solar and energy storage for energy efficiency projects. This money is expected to generate up to $ 3 billion in additional funding.

The Connecticut Green Bank, which will celebrate its 10th anniversary in June, also opened a healthy pipeline last year despite shock wave shutdowns caused by the clean energy sector, said chief executive officer Bryan Garcia. “Going into COVID, we were having a banner year… it ended up being one of the best.

Build resilience

The pioneers of state-level green banks have primarily focused on small-scale solar development and energy efficiency projects – often with a focus on smaller projects that serve low-income or ‘unbanked’ communities. », And always in line with the priorities of local authorities such as renewable portfolio standards.

Florida’s nonprofit Solar and Energy Loan Fund, for example, started with energy, but expanded its loan products in 2019 to include funding for things like roof repairs, anti-shutters. hurricane, conversion of septic tanks to sewers and other measures to improve resilience. Connecticut is looking for projects focused on alternative fuel vehicles and associated infrastructure, and the governor plans to expand the green bank’s mandate to cover infrastructure designed to build resilience – including everything from water, waste and recycling infrastructure to land conservation and nature-based initiatives. carbon sequestration solutions. “It’s an all-inclusive mitigation and adaptation toolkit,” Garcia said.

The nationwide focus on green and resilient infrastructure is stimulating local interest in projects such as electric vehicle charging infrastructure and micro-grids, observed Mary Templeton, CEO of Michigan Saves. “These are really expensive projects,” she said. “Access to low cost capital could really accelerate this.”

According to the Coalition for Green Capital, around $ 21 billion in short-term infrastructure projects would benefit from national legislation, including $ 3.1 billion in climate resilience measures, $ 5.3 billion in efficiency initiatives and building upgrades and $ 626 million in electrification. Specific opportunities include solar and storage projects on Native American tribal lands, invoice financing through utility partnerships to upgrade rural homes, and resilient infrastructure loan programs.

There should be a law

From a private sector perspective, a national institution could attract a wider variety of lending partners – from massive banks and lenders committed to investing in projects that serve the goals of the Paris Agreement to hyperlocal institutions that can respond. to the needs of disadvantaged communities that are not. not well served by the traditional funding system. Federal legislation would require at least 40 percent of funds to be used for communities that have been most affected by the effects of climate change or that have suffered substantial job losses as a result of the transition to fossil fuels. .

The latter is particularly important to ensure that infrastructure investments do not perpetuate the same system of inequity that has built today’s aging infrastructure. “We have to make sure that we are not just changing the branding of the old system and that we are also questioning and transforming the values ​​that underpin these financial systems.… If we propagate the idea of green banks without transforming the values ​​that underpin these institutions, it’s just about recreating the disparities in the fossil fuel economy, ”said Michelle Moore, CEO of the nonprofit Groundswell.

Jeff Schub, executive director of the Coalition for Green Capital, the umbrella organization that manages the American Green Bank Consortium, said a national green bank would help finance and capitalize local banks across the United States and allow regional or multi-state initiatives. The only reason there aren’t at least 50 of these institutions isn’t yet because of politics – bipartisan support is stronger than ever – is because states and local jurisdictions have to compete. for public funds, he said. “This is now seen as a proven model that does what it is supposed to do.”

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