Sustainable Finance Breaks New Ground with Green Banks
New energy technologies inch closer to commercial viability every day. And although markets are beginning to open up to these technologies, there are still a number of financial hurdles that exist between the R&D phase and consumer-ready products.
Green banks address these hurdles by financing clean energy projects through long-term, low-interest loans that would not be readily available otherwise.
The concept was first realized in 2011, when Connecticut created the first green bank to make clean infrastructure more affordable statewide. The concept spread from there, and now green banks have caught on across the country. Microgrid Knowledge reports that green banks in the U.S. have generated $3 billion in clean energy investments so far.
Green banks can take on a variety of forms. The term usually describes a public entity, private/public partnership, or non-profit organization that deals with financial investments in low-carbon infrastructure. Different regions have different needs, and green banks are often specialized to fit the area they serve.
In the last 10 years, the Coalition for Green Capital (CGC) has become the foremost authority on creating and financing green banks in new places. CGC reports that they have led over $2 billion in clean energy investment in that time. Their wide reach has made them a powerful force in furthering clean energy development.
Earlier this year in Ohio, the Cuyahoga County government approved a $50,000 contract with CGC as the first step towards establishing a green bank in the area. If all goes well, the bank could open by the end of this year. The green bank’s financing will be available to residents, non-profits, local governments, as well as industries and other commercial ventures.
As green banks continue to find success, they have joined forces to share knowledge and gain access to more investment capital. January kicked off the formation of The American Green Bank Consortium, a CGC-led initiative that gathers many green banks under one entity. The founding membership includes the Baltimore Climate Access Fund, the Connecticut Green Bank, the Florida Solar Energy Loan Fund, the Maryland Clean Energy Center, the Nevada Clean Energy Fund, and the New York City Energy Efficiency Corporation.
The newly-formed consortium will feature a number of benefits like an annual summit, standardized documentation, and discounted services for green banks that decide to join up.
Building on their previous success, CGC released a new report at the beginning of February, in cooperation with the Green Bank Network. The report details the potential for supporting green banks through Program Related Investments, a common investment tool used by philanthropic foundations.
We’re excited to see green banks pick up momentum in 2019. As more cities and states adopt this method for financing local green projects, green banks could become a household name in the financial world, creating a profitable way for private and public players to make the switch.