The United States has officially launched a new “green bank” with the aim of channeling over $160 billion of capital into climate technology initiatives. While banks have traditionally funded large-scale renewable energy projects, smaller projects that have a significant positive impact on communities, such as installing heat pumps in homes or retrofitting affordable housing, have often been overlooked due to their limited profitability.
“It’s a chance to prove that this works and creates real benefit on the ground for people across America,” said Dawn Lippert, founder and CEO of Elemental Excelerator, in an interview with TechCrunch.
This green bank, which has long been advocated for by climate activists, will now become a reality. The EPA has announced that it will be awarding $20 billion in grants from the Inflation Reduction Act to eight organizations that will use the funds to provide loans for these types of projects.
Lippert added that the focus of the green bank will be on supporting tribal communities, rural areas, and low-income and disadvantaged communities. In fact, over $14 billion of the funding will specifically target these types of communities, according to the EPA.
What makes this green bank different is that, since the money will be used for loans, it can be recycled once the loans are repaid. This approach has been successful for other green banks, such as the Connecticut Green Bank, which has a delinquency rate comparable to other commercial lenders.
“It’s a chance to prove that this works and creates real benefit on the ground for people across America,” said Dawn Lippert, founder and CEO of Elemental Excelerator.
In addition to financing energy upgrades, the green bank, known as the Greenhouse Gas Reduction Fund, is also hoping to leverage private capital, with a goal of attracting $7 for every dollar dispersed. However, some experts predict that the actual amount of private investment could be much higher, potentially reaching up to $12 for every dollar on the bank’s balance sheet, according to McKinsey.
McKinsey estimates that the U.S. will need $27 trillion by 2050 to achieve net-zero carbon emissions, making the green bank’s initial $20 billion seem small in comparison. However, its ability to stimulate private investment and its sustainability as a continuous source of funding should allow it to have a long-term impact on the goal of reaching net-zero emissions.
Not only will the green bank have a positive impact on the environment, but it will also benefit founders and investors. While the majority of the funding is geared towards consumers and small businesses, there is potential for equity investments, according to Lippert. Moreover, the funding will help drive demand for proven climate technology that is ready for widespread use.
For technologies that are not yet fully developed, the loans provided by the green bank will serve as a signal to founders and investors that there is a market for consumer-level climate tech that serves disadvantaged communities.
“This $20 billion of funding is going to have a really significant impact on creating jobs, reducing costs for American families, creating a healthier, safer future for our children,” Lippert said.
