The Biden administration unveiled the winners of the largest grant program under the climate law, initiating a $20 billion effort to revolutionize community lending and promote a green economy in the United States on Thursday.
Under the Greenhouse Gas Reduction Fund, the EPA will give out eight initial grants, with a total value ranging from $400 million to nearly $7 billion. Climate United, a collaboration comprising two affordable housing lenders and a nonprofit impact investment firm, will receive the biggest prize.
The EPA finance program will “create a first-of-its-kind national network of clean technology financing institutions that will finance tens of thousands of climate and clean energy projects in the years to come,” a senior administration official told reporters on Wednesday.
On the call, which the White House arranged for reporters under the stipulation that officials would remain anonymous, the official continued, “And just as important, this national network would deliver capital to communities that are too often left behind.”
According to an administration official, the White House projects that the program will prevent or reduce 40 million metric tons of carbon dioxide annually and generate $7 in private investment for every $1 in taxpayer funding. According to the official, low-income areas will benefit from the program overall to the tune of 70%.
At an event on Thursday in Charlotte, North Carolina, Vice President Kamala Harris and EPA Administrator Michael Regan will announce the awards. According to officials, they will meet a homeowner in a historically Black neighborhood who reduced their utility costs and increased their home’s energy efficiency by working with Self-Help, one of the affordable housing lenders involved in Climate United.
To finance projects like community and residential solar installations, electric delivery vans, and energy-efficient multifamily housing, the EPA selected three nonprofit organizations, Climate United, Coalition for Green Capital, and Power Forward Communities, to receive a total of $14 billion in funding. In addition, the organization will give out five grants totaling $6 billion to credit unions and nonprofit community development financial institutions (CDFIs) that currently assist underprivileged communities intending to increase their capacity to provide green loans.
During the program’s seven-year duration, the capital that the EPA transfers to those nonprofits will be distributed to a larger range of nonprofit lending institutions. The goal of the program, according to EPA, is to permanently alter how these organizations view lending for distributed power, electric vehicles, and energy-efficient construction.
Some of the larger clean energy projects that big green banks have historically focused on may benefit from the program. However, the majority of the program’s funding is being allocated by the administration to CDFIs and credit unions that assist low- and moderate-income urban and rural areas in the United States.
This implies that rather than going toward utility-scale clean energy projects, a bigger portion of the funds could be used for loans to consumers or small businesses.
A senior administration official told reporters on Wednesday that “these community lenders are the backbone in many communities of access to capital, and providing those institutions with capitalization to begin lending into the clean space only means that more American families will have access to these cost-effective, air pollution-reducing technologies.”
The representative clarified that the program would only provide loans to projects that do not currently have access to capital; this is a requirement that might be challenging for commercial renewable energy projects, for instance.
The $20 billion will be distributed by the EPA through two competitions: the Clean Communities Investment Accelerator (CCIA) and the National Clean Investment Fund (NCIF).
Those briefed on EPA’s plans stated that Climate United, the largest recipient under the NCIF competition, will concentrate on environmental sustainability and economic opportunity in low-income disadvantaged communities. The group is a collaboration between CDFIs Community Preservation Corp. and Self-Help and global impact investor Calvert Impact Capital.
Under the NCIF competition, the Coalition for Green Capital, which represents state and local green banks, will receive $5 billion to capitalize on green banks and finance eligible projects. $2 billion will be given to Power Forward Communities, which includes housing charities, national affordable housing supporters LISC and Enterprise Community Partners, and the electrification nonprofit Rewiring America, with a focus on housing.
Five awards will also be given out by the EPA as part of the $6 billion CCIA program. The Opportunity Finance Network, a CDFI intermediary, received $2.3 billion in grants, while the Native CDFI Network, which assists nonprofit Native American lenders in cities and on reservations, received $400 million. Grants under the initiative will also be given to nonprofit Justice Climate Fund, CDFI Appalachian Community Capital, and CDFI intermediary Inclusiv.
Even among the chosen applicants, the prizes have been kept a secret. The CEO of Climate United, Beth Bafford, stated that her organization did not learn the grant amount until late Wednesday and that they were only formally notified Sunday night that they would receive an award.
However, according to Bafford, she and her group have been focusing on outreach and building a pipeline of partner organizations and projects for the past few months.
“We basically made the decision internally that we were going to prepare as if we are getting an award,” she said. ‘We knew we had to start running to be prepared for this moment.”
According to Bafford, Climate United plans to start making payments before the year is out. Its implementation plans, however, will need to be modified to consider the award size, she said. It submitted a $14 billion NCIF application in its entirety.
Climate United may work in the housing sector, even though Power Forward Partners will concentrate on it. The EPA designated the Greenhouse Gas Reduction Fund as one of the program’s primary goals. It is the largest investment in building decarbonization made possible by the Inflation Reduction Act.
To reduce carbon emissions, Climate United wants lenders who originate mortgages for homes, apartment buildings, and office buildings to also lend money for carbon-cutting upgrades like electric appliances, heat pumps, and vehicle charging.
“There are trillions of dollars of mortgages originated every year,” Bafford said in a recent interview. “If you don’t incorporate deep decarbonization investments through that process, we are never going to get to decarbonization at the scale that we need to actually make a dent in our buildings emissions.”
The CEO of Coalition for Green Capital and a seasoned proponent of green banks, Reed Hundt, announced that community lending coalitions would receive three-quarters of the program’s funding.
Hundt referred to CGC’s $5 billion green bank capitalization as “a really good start.”
He declared, “We’re going to need a lot more money even to make a dent in our pipeline.” According to Hundt, CGC has $30 billion worth of projects and investment opportunities lined up, with over half of them being in low-income communities.
CGC wants to get more funding and demonstrate significant results.
According to Hundt, “good investing attracts more investing.”
According to Douglass Sims, the acting CEO of Justice Climate Fund, the nonprofit organization has created educational materials on green lending and will create specialized initiatives to assist specific CDFIs and credit unions. Under CCIA, Justice Climate Fund, an unsuccessful NCIF applicant, was awarded $940 million.
Community lenders can use the CCIA funds to hire personnel with experience in solar financing, energy-efficient building design, or infrastructure for electric vehicles. Additionally, community lenders who sign up for the program can get funding to lend money in those regions.
“We know that these lenders are already lending in communities, and they have a long track record of doing so, so it’s really about what they need to be more effective,” Sims said.
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