Green Banks – and What they Can Do for You

Green Banking is a method of Green Investing, where one entity provides funds for one or multiple sustainability projects.

Green banks exist to fill market gaps, which are “needs” that aren’t properly funded at this moment in time. This often happens in sustainability projects, and for many reasons. For example: 

  • Lack of familiarity with technology
  • Lack of credit score of startup companies
  • Targeted Financing Solutions:
    • Credit enhancement Example: Michigan state have local lenders lending capital for energy projects. If this loan defaults, then, the green bank of Michigan will ensure to make the payments (due) to the loans.
    • Direct loans: In NY, all renewable energy projects need to pay a large upfront fee to be able to proceed. NY Green Bank can lend this short term amount to cover this upfront fee.

That is the fundamental definition of a green bank…

as for the form, green banks have malleable formats. In other words, there isn’t a “one size fits all” structure developed for green banking. What they all have in common is the aforementioned mission, and the following characteristics: 

  • A green bank is its own entity
  • It has its own assets that it’s trying to grow over time
  • A way to facilitate capital flow to fund local projects
  • Often get their capital from different sources:
    • Public Funding
    • Private Investors
    • Public Utility Companies
  • They aim to facilitate the flow of capital and connect a variety of different factors
  • They’re not meant to compete with other funding systems

Now, as to what the disparities look like:

  • Governments can have an investor role or an oversight role 
  • Can focus on different priorities 
    • Equity and environmental justice
      • For example in Baltimore – a fund was created for solar applications in low income areas – and a lot of capital was invested from the private sector.
  • Can be very high-level
  • Can be investor-specific
    • Allowing investors to access projects that they wouldn’t have been able to access otherwise
  • The limitations definitely depend on the applicable legislation
  • Can be owned by government, NGO, or private industry

Green banks however have one mission in common – they connect a variety of different actors, and facilitate the flow of capital into sustainability projects, and advance communities’ environmental, economic and energy priorities!

For more info on U.S. Green Banks, including a list of Green Banks you can reach out to,  check out NREL’s webpage on the topic!

This was a pretty informative, albeit rather boring post, but I believe that acquiring objective knowledge from time to time – without taking too many tangents – is necessary to move forward!

That being said, I’ll see you soon with a more exciting subject :)!