Impact Investing | July 3, 2024

GGRF will require lots of reporting. Tech, clarity, and collaboration can help

Amanda Li
Guest Author

Amanda Li

The $27-billion Greenhouse Gas Reduction Fund rolling out this summer promises to deliver sustainable infrastructure to communities across America. Green banks, community development financial institutions (CDFIs), and other community lenders will transform these federal dollars into meaningful projects empowering underserved communities — think more clean, affordable energy, lower heating and cooling bills, electric vehicle charging, and more. 

But these same lenders face a growing challenge: How will they prove the fund, known as GGRF, is actually working and impacting local communities?

With billions of federal dollars in play, the GGRF magnifies a longstanding challenge in project finance. Across the industry, information-gathering methods and reporting standards vary. Most deals are managed through a collection of data points scattered across Excel spreadsheets, emails, PDFs, and other documents, and the assembly of such information to make an investment or performance decision is time-consuming and burdensome. Simply put, stakeholders across the ecosystem are not on the same page. 

The time to tackle this challenge is now. Together, we can create a common language to scale capital deployment and develop a robust, sophisticated project finance industry.

That effort begins with the Environmental Protection Agency (EPA), which is responsible for administering the GGRF, clearly communicating how it plans to evaluate qualified projects. The federal agency’s GGRF implementation framework is a good start, but far from perfect. Depending on the GGRF program, the EPA estimates recipients could log anywhere from 14,900 to 201,500 hours a year in reporting compliance in each of the fund’s first three years — costing anywhere from $1.6 million to more than $3.5 million per year.

The reporting burden is worrying to some GGRF recipients and industry experts. Recent public comments submitted to the EPA highlight these concerns, especially for the smaller funds this program is meant to empower, arguing that the true burden required to accurately report on capital deployment and GGRF-financed projects is much higher. 

This challenge presents an opportunity for collaboration: The EPA can work with community lenders, green banks, and project finance experts to clarify the program’s requirements and develop clear, concise definitions within the GGRF framework. 

Better still, this type of collaboration could spark important conversations on how to standardize the project finance industry so that it can scale up to meet the energy transition’s needs, both in the context of the GGRF and beyond.

To further this conversation, Banyan Infrastructure submitted our comment to the EPA in April on the mismatch between the federal agency’s estimations and the industry’s concerns. We believe clarity, collaboration, and technology all have a role to play in filling the reporting gaps set to arise with funds.

Clarity and standards 

First, the EPA should quickly clarify its reporting requirements and provide specific measurements, calculation methods, and critical assumptions for all reporting entities, including green banks, CDFIs, and other community lenders. For example, the “project types” eligible for GGRF financing — meaning the underlying technology or technologies the fund invests in, such as solar or battery storage — are not clearly defined. Providing that list to recipients and subrecipients is just one example of the many definitions the EPA should clarify. 

Similarly, there is no one agreed-upon methodology for calculating “private capital mobilization,” a metric that captures to what extent public financing attracts private capital to a project. Clear, simplified reporting definitions will take the guesswork out of these requirements altogether.

Clear requirements are especially critical as many GGRF lenders are small businesses with limited capacity and will require technology to streamline their operations and take full advantage of the GGRF. 

In our industry-wide project finance software survey earlier this year, Banyan Infrastructure found more than a third of respondents spent five or more hours a week managing closing checklists, tracking to-dos, creating reports, and performing other basic tasks that a computer could easily handle. 

Software solutions

Implementing software solutions to do the heavy lifting can help save time and money for the lenders tasked with reporting to the EPA or other GGRF entities. Tracking multiple projects through software also allows funds to roll them up into a portfolio, giving a 360-degree view of investments, cash flow waterfalls, impact metrics, and more. 

These tools can have a meaningful impact. As Banyan Infrastructure customer Lindsay Drogin, director and head of New York Green Bank’s Investment Administration and Portfolio Support, stated, “We are now managing critical pieces of data with greater accuracy than ever before. We have more metrics and reporting at our fingertips and can manage transaction tracking more efficiently.”

Industry collaboration

Collaboration is another critical piece of the puzzle. Industry experts and technologists are already sharing best practices for maximizing the opportunities this new fund presents. Community lenders, who have learned how to take on risk successfully thanks to a deep knowledge of the communities they serve, and Wall Street, whose investors are skilled at mobilizing capital and turning millions into billions, must come together, too, to learn from one another and generate 7x the original GGRF deployment. 

Last month, Banyan Infrastructure joined the Milken Institute’s Community Infrastructure Center and nonprofit Elemental Excelerator to enable green banks and community lenders to increase the throughput of funding and support to essential GGRF-funded projects in housing, energy, and transportation. 

We have already been working with the Clean Energy Fund of Texas, Nevada Clean Energy Fund, Access Plus Capital, and others to build standards and processes to help each lender scale up to meet this historic moment. With the GGRF, the EPA can become the industry’s standard-setter.

This change will not happen overnight, but the GGRF provides the perfect catalyst to build the green financial infrastructure our country urgently needs. We are excited to play an active part in this transformation and share the lessons we have learned with the EPA to develop a framework for this transition.

Amanda Li is COO and co-founder of Banyan Infrastructure.