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US creates ‘green bank’ to finance community climate projects

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

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

A senior administration official told reporters Wednesday that the EPA funding program would “create an unprecedented national network of clean technology financing institutions that will finance tens of thousands of climate and clean energy projects in the coming years.”

“And equally important, this national network would provide capital to communities that are often left behind,” added the official in the call, which the White House held for journalists on the condition that those responsible remained 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 dollar of taxpayer money spent, according to the administration official. The official said that 70 percent of the program’s overall benefits will go to low-income communities.

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

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

Capital transferred by EPA to these nonprofits will be disbursed to a broader universe of nonprofit lending institutions over the seven-year life of the program. The EPA hopes the program will irrevocably change the way these institutions approach lending for distributed energy, electric transportation, and energy-efficient buildings.

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

This suggests that a greater portion of the capital could be applied to consumer or small business loans rather than utility-scale clean energy projects.

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

He added that only projects that do not now have access to capital would be eligible for loans under the program – a barrier that commercial renewable energy projects, for example, may have difficulty overcoming.

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

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

The Coalition for Green Capital, which represents state and local green banks, will receive $5 billion under the NCIF competition to capitalize green banks and finance eligible projects. Power Forward Communities – which includes electrification nonprofit Rewiring America, national affordable housing supporters 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. These grants range from $2.3 billion to the Opportunity Finance Network – a CDFI intermediary – to $400 million to the Native CDFI Network, which supports nonprofit Native American lenders on reservations and in cities. CDFI Appalachian Community Capital, the intermediary for CDFI Inclusiv, and the nonprofit Justice Climate Fund will also receive grants under the program.

‘A very good start’

The awards have been a closely guarded secret – even from the selected candidates. Beth Bafford, CEO of Climate United, said her group only received formal notification that it would receive an award on Sunday night and did not know the value of the grant until Wednesday night.

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

“We basically made the decision internally to prepare as if we were going to receive an award,” she said. “We knew we had to hit the ground running to be prepared for this moment.”

Bafford said Climate United hopes to begin disbursing money before the end of the calendar year. But she said she will need to adjust her implementation plans to take into account the size of the award. It requested the full $14 billion under the NCIF.

While Power Forward Partners focuses on housing, Climate United may also work in this space. The Greenhouse Gas Reduction Fund is the largest investment the Reducing Inflation Act has made in decarbonizing buildings, and the EPA has identified it as one of the program’s central priorities.

Climate United hopes to encourage lenders to make loans for carbon-reducing improvements, such as appliances, heat pumps and vehicle charging, when they originate mortgages for homes, apartment complexes and office buildings.

“There are trillions of dollars in mortgages originated every year,” Bafford said in a recent interview. “If we don’t incorporate deep decarbonization investments through this process, we will never achieve decarbonization at the scale needed to truly reduce emissions from our buildings.”

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

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

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

The CGC intends to show solid results and seek more funding.

“Good investment attracts more investment,” Hundt said.

Douglass Sims, interim CEO of the Justice Climate Fund, said the nonprofit has developed courses on green lending and will create customized programs to support CDFIs and individual credit unions. The Justice Climate Fund – an unsuccessful NCIF candidate – received $940 million under the CCIA.

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

“We know that these lenders are already lending to communities and have a long history of doing so, so the question is really what do they need to be most effective,” Sims said.

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