It’s not a question of whether to go forward. It’s how.
Before its account at Citibank was frozen in an ongoing dispute with the Trump administration, Climate United had closed four loans, totaling $47 million, that are expected to mobilize an additional $1.6 billion in private financing for green upgrades and improvements.
The nonprofit coalition pulled together by Calvert Impact to vie for a piece of the Greenhouse Gas Reduction Fund, had committed a total of $542 million to qualified projects including green energy upgrades, EVs, community solar and other projects in mainly low-income communities that might otherwise be left behind by the low-carbon transition.
By 2030, the group projected, its loans could leverage $21 billion in private capital.
Similarly, another nonprofit group, Justice Climate Fund, had approved $250 million in funding before the freeze to 35 qualified lenders with a combined $1.5 billion in projects in their pipeline. That was just the first wave of financing to a broader universe of 300 qualified lenders identified by Justice Climate, with an estimated $8 billion project pipeline.
“Demand for clean energy lending in communities did not stop because of a change in EPA policy direction,” Justice Climate Fund’s Amir Kirwood tells ImpactAlpha.
Bafford, Kirkwood and other green and community lenders will join this week’s Agents of Impact Call, “Ramping up green lending – even without that $20 billion,” Wednesday, June 11 at 10am PT / 1pm ET / 6pm London (RSVP today).
Many of the deals that penciled out for loans under the Greenhouse Gas Reduction Act should still be viable, though financing will certainly be harder to come by if the EPA is successful in efforts to yank back some $20 billion in GGRF funds or otherwise thwart their deployment.
Climate United, Climate Justice Fund and other green lenders who had been set to deploy those funds are now trying to marshal private financing without GGRF capital as an anchor. Needed: the right mix of philanthropic funds, catalytic capital and market-rate finance to salvage at least some of the green projects in low-income communities the GGRF was intended to reach. More broadly, the nonprofit lending coalitions that came together to seize the fleeting opportunity are seeking to make good on the GGRF’s goals of setting up a lasting green banking network for US communities.
“The shift to domestically produced clean energy is inevitable – but who benefits from the shift is not,” Climate United’s Beth Bafford writes in a guest post on ImpactAlpha. “To meet the complex needs of broken markets, we need multiple tools in the toolkit – diverse financial products, policy solutions, innovation, and expertise – to bring the right tool at the right time.”
Lowering lifetime costs
Calvert Impact, which has seen similar market failures and capital gaps across sectors and geographies over three decades, is still seeking to shape a market for such financing, with intentional collaboration and innovative product designs.
“We need to move from doing deals to making markets; from building funds to building market shaping institutions that don’t just invest in underserved communities but are committed to shaping how capital flows more freely to them,” Calvert’s Jennifer Pryce wrote in a separate guest post on ImpactAlpha last month.
As an example, Bafford points to Climate United’s $250 million deal last October to purchase 500 electric drayage trucks to resell to truckers moving shipping containers at Southern California ports. The electric trucks have clear benefits: their lower operating costs save truckers money; they reduce air pollution for nearby communities; and their domestically-produced batteries create jobs.
But because they require more upfront costs than diesel trucks and, as an emerging technology, lack established resale values, mainstream financiers shy away.
Similar examples of market gaps that can be bridged with accessible financing abound in solar, affordable housing, small business lending, building efficiency, resilient infrastructure, broadband access, and so many more, Bafford said.
Climate United approaches such opportunities from all sides: taking risks where data is lacking and investing time to understand local policy incentives and how capital can bridge them. By making bulk purchases, it can negotiate maintenance and warranty packages, insurance policies and electricity costs.
Climate United also works the demand side, persuading big retailers and other corporations that contract with small truck operators to prioritize electric trucks to reduce emissions. “Together these actions can kickstart an electric truck vehicle leasing market,” says Bafford.
“Capital markets are organized by asset class. Market challenges are not,” Bafford writes.
“The work of market shapers is to be the bridge between the two to diagnose what’s broken, and deliver targeted solutions.”
Just transition
To facilitate such an expansion of lending, the EPA, in the waning days of the Biden administration, awarded $14 billion through the National Clean Investment Fund and $6 billion through the Clean Communities Investment Accelerator (another $7 billion was awarded separately through a third program, Solar for All).
That capital has been frozen in a Citibank account since February as a lawsuit against the Trump administration’s EPA slowly plays out in the courts. An appeals court is mulling whether to uphold a preliminary injunction granted to Climate United and GGRF plaintiffs in mid-March by a federal judge. A ruling may not come for months, and whatever the decision it is sure to be appealed.
In the meantime, GGRF awardees and advocates for a just transition are looking to continue the kind of market-building and shaping the GGRF intended via the private sector.
Justice Climate Fund, or JCF, was awarded nearly $1 billion to provide financial and technical support to help community lenders and minority-owned banks scale up their green lending capacity.
These lenders, says Kirkwood, “are often the first movers of capital in low-income communities, and in many cases, the only sources of capital.” Yet they lack the capital, technical capacity and clean energy expertise to scale their impact — a market gap that JCF’s nearly $1 billion GGRF award was meant to address.
Faced with the prospect of waiting out the legal proceedings or perhaps even losing the GGRF funds altogether, JCF recently analyzed some 100 projects in its network’s pipeline to see if they could be viable without the government subsidies.
About two-thirds, or $1 billion, may be able to move forward, says Kirkwood, although credit enhancements and other support would still be beneficial.
In addition, he says, “There is an opportunity to meet the additional $7 billion in market demand, which would require continued work to attract impact investors, partner with state and local governments, and mission aligned philanthropic investors.”
Raising funds to move these projects forward is JCF’s goal for the next 12-18 months.
Innovative finance
For a glimpse of how that might take shape, consider the New York City Energy Efficiency Corporation, which has mobilized more than $500 million in financing since 2010, halfway to its goal of $1 billion by the end of this year.
“Our mission is filling gaps in the market for clean energy finance,” says Curtis Probst of NYCEEC, or “Nice-ee” as it is known.
The nonprofit green bank — a sub-awardee of the green bank network Coalition for Green Capital — works on community-scale green projects in New York and surrounding areas, typically sub-$5 million projects that are too small for larger financiers, to retrofit multi-family affordable housing or install solar and EV charging infrastructure in buildings. With 1 million buildings in New York City alone, the pipeline is robust.
The $20 billion in GGRF funding “would be incredibly catalytic,” acknowledges Probst. “But we’ve been operating for 15 years without GGRF,” he says. “We are still seeing projects where there are very strong paybacks, without any incentives.”
NYCEEC partners with other lenders to stretch its capital and bring others into green lending. In upstate New York, NYCEEC funded 20% of an $8 million loan for community solar in a low-income area, bringing in Nonprofit Finance Fund to pick up the remainder.
It has also tapped the Community Investment Guarantee Pool, a facility backed by 17 philanthropies and managed by Locus, to reach riskier markets. “There are lots of innovative ways we can try to do this,” says Probst.
“We try to do cool stuff, because the political winds change, the capital markets change,” he added. “We always have to be nimble in how we’re trying to finance a just and equitable clean energy transition.”
