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New US ‘green bank’ aims to channel more than $16B of capital into climate tech

Banks have been financing large-scale renewable energy projects for years, from utility-scale solar farms to wind farms stretching across the horizon. But smaller projects, like installing a heat pump in someone’s home or retrofitting affordable housing, often get overlooked. They simply don’t make enough profit.

But the demand is there, which is why advocates have been calling on the federal government to support a so-called green bank that would underwrite such projects.

Green banking is now a reality. On Thursday, the EPA announced that it has awarded $20 billion in grants under the Inflation Reduction Act to eight organizations, which will use the funds to issue loans to help with the projects.

“This is an opportunity to prove that this works and create real benefits for people across the United States,” Elemental Excelerator founder and CEO Dawn Lippert told TechCrunch. Adding, “Tribal communities, rural communities, low-income and disadvantaged communities are really the focus here.”

In fact, more than $14 billion will go to communities that fit those descriptions, the EPA said.

What’s more, since the money is used for the loan, it can be recovered once the loan is paid off. Green bank lending also has a strong track record. For example, Connecticut Green Bank’s delinquency rates are on par with other commercial lenders in its residential and commercial portfolios.

In addition to financing energy upgrades, the Greenhouse Gas Reduction Fund hopes to attract $7 in private capital for every $1 invested. In fact, that’s probably a conservative figure: McKinsey estimates that new green banks should attract more than $12 in private investment for every dollar on their balance sheets.

McKinsey estimates that the U.S. is expected to need $27 trillion by 2050 to achieve net-zero carbon emissions, which may make the $20 billion in green banks seem small. But its ability to spur private investment and the fact that it’s not a one-time grant should allow it to have an impact beyond its original bottom line.

Founders and investors should see some benefits, too. Lippert said that while the funding is primarily aimed at consumers and small businesses, equity investments are also possible. Additionally, the funding should spur demand for technologies that are already proven and ready for commercial deployment.

For those who haven’t already done so, the Green Bank loan should have a knock-on effect, sending a signal to founders and investors upstream that there is a market for consumer-grade climate technology that works in low-income and disadvantaged communities. .

“This $20 billion will have a truly significant impact on creating jobs, lowering costs for American families, and creating a healthier, safer future for our children,” Lippert said.

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