Kristine Babick knows precisely how much work Washington, D.C. has to do to reduce greenhouse gas emissions. It’s her job to know, as an analyst with D.C.’s soon-to-launch green bank.
“Seventy-five percent of our carbon emissions are from our built environment,” Babick says of D.C. That’s double the national average for greenhouse gases from the built environment.
D.C.’s is the latest on a list of green bank initiatives that are working to harness public and private dollars to transform energy and transportation systems. The city’s mayor, Muriel Bowser, has pledged to make the U.S. capital carbon neutral by 2050.
“The amount of money that would be required to achieve a lot of those [climate] goals would be beyond the public capacity,” Babick says, explaining why the District decided to launch a green investment bank. “There was a recognition that we needed to catalyze private sector investment in order to achieve a lot of these goals.”
The city plans to capitalize the bank with $7 million each year for the next five years. These funds, according to Marc Nielsen with the D.C. Department of Energy and Environment, come from fines levied on local power companies that don’t meet the city’s renewable portfolio standards. “A certain portion of their energy supply either has to be a renewable source or a locally-sourced solar source in the District, and if they can’t meet that, they go ahead and pay this alternative compliance payment,” Nielsen explains.
Cities, states and even countries are creating green banks, which are generally public or quasi-public entities that finance more environmentally responsible energy and transportation systems. Rhode Island, New York, Connecticut, Michigan, California, the United Kingdom, Australia, Japan, and Malaysia all have examples of green banking initiatives.
The Natural Resources Defense Council recently published a report on how green banks assess and report impact. According to report co-author Doug Sims, the most successful green bank example in the U.S. currently is in Connecticut. An evaluation of the state’s Solar Homes and Jobs Opportunity Act estimates that the current measures will generate $126 million in additional personal income in Connecticut through energy savings from 2012-2037, along with roughly 1,768 jobs, of which 1,710 would be in the private sector.
“If you look at the deployment of solar [energy] programs prior to the green bank strategy, the uptake was very low,” Sims says.
Meanwhile, among its nearly $300 million in investments so far, New York state’s green bank last year loaned $50 million to support the expansion of New York City’s Citi Bike program to low-income communities in the outer boroughs. It’s one example, says Sims, of green bank efforts to work in communities that have had challenges accessing capital.
Sims also mentions how New York City’s Energy Efficiency Corporation (NYCEEC), a non-profit organization dedicated to developing financing for clean-energy solutions for buildings, has been working on supporting affordable, multi-family buildings. The NYCEEC’s web site says that it has financed $134 million worth of clean energy projects, which includes upgrading 196 buildings encompassing 4,660 units of affordable housing.
“Every time you invest in energy efficiency and reduce buildings’ operating costs, you’re preserving affordable housing,” Sims says. Lowering energy expenditures reduces one of the largest controllable costs for buildings, he explains. “Many times, these buildings are thinly capitalized, so whenever you can [reduce costs] it reduces the pressure of having to sell the building or convert it to market rate.”
Michigan Saves is a slightly different kind of green banking initiative, which has facilitated more than $100 million in residential and commercial loans targeting energy-efficiency improvements across the state. The initiative was funded in 2009 by a grant from the Michigan Public Service Commission.
“Michigan Saves is not a lender per se,” explains Todd Parker, customer service manager for Michigan Saves. Instead of making loans itself, Michigan Saves has established a network of authorized lenders — so far, six credit unions statewide — that offer a standardized loan product to residential customers, up to a maximum of $30,000. (Michigan Saves also facilitates loans for commercial borrowers, and helps all borrowers connect with qualified contractors.)
“So, when you look at the definition of a green bank facilitating private investment, that’s exactly what we’ve done,” Parker says.
One of the techniques Michigan Saves has adopted to facilitate lending is to work with utility companies to accept loan repayments as part of monthly utility bills. It’s called an “on-bill” financing program.
“It’s really hard to operationalize in a state like Michigan where you have three investor-owned utilities, 56 municipal utilities and a dozen cooperatives. They all have different billing systems. They all have different customer bases,” says Parker, yet, Michigan Saves hopes to expand this kind of on-bill financing program to reach 60-70 percent of the state’s population.
On-bill financing can help boost access to financing for energy efficiency improvements. “A lot of on-bill programs will look at a customer’s utility bill payment history. And if they have 10, 11, 12 months of on-time bill payments, they can get financing regardless of what their credit score is,” Parker explains. “We’re looking at developing some of those on-bill financing programs with some of the larger utilities in the state to see if that’s a way can drive investment into some of the more lower-income neighborhoods where they desperately need these types of improvement — not just from a saving energy, saving money perspective, but from a health and safety perspective as well.”
Not to be outdone, Australia has launched a Sustainable Cities Investment Program, which aims to invest AU$1billion (around US$761 million) in renewable energy and energy efficiency over ten years. It may also, along with the other green banking initiatives, help to save a different kind of city: Coral reefs cover less than one percent of the planet’s surface, yet are home to more than a quarter of all ocean species, not to mention protect shorelines from erosion. Nearly a third of the corals in Australia’s Great Barrier Reef died over the course of nine months in 2016 due to high temperatures. Events like that speak to the urgency of reducing greenhouse gas emissions. Green banks are stepping in to finance energy and transportation systems that will do precisely that.
UPDATE: We’ve clarified the reference in this article to the national average of greenhouse gases from the built environment.
This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter. The Bottom Line is made possible with support from Citi.
Zoe Sullivan is a multimedia journalist and visual artist with experience on the U.S. Gulf Coast, Argentina, Brazil, and Kenya. Her radio work has appeared on outlets such as BBC, Marketplace, Radio France International, Free Speech Radio News and DW. Her writing has appeared on outlets such as The Guardian, Al Jazeera America and The Crisis.