Green banks are state funded banks designed to fight climate change by funding projects that have the potential to decrease the global carbon footprint and increase the use of renewable energy sources.
There are several green banks in the U.S already. They’ve helped mobilize almost $3 billion in public and private capital for these projects.
Globally, the green bank network, an organization consisting of nine green banks, invested 59% of its lending portfolio in renewable energy projects, like wind. This amounts to avoiding 4.6 million metric tons of CO2EQ emissions or the equivalent of taking 19 million cars off the road.
What’s the story behind these banks?
In 2008, Reed Hundt and Ken Berlin formed the idea of green banks as part of the Obama-Biden Transition Team’s plans to fund more clean energy projects.
A similar idea was then presented as an amendment to the American Clean Energy and Security Act.
In 2009, when the bill didn’t pass the Senate, advocates for the green banking system decided to create green banks at a state level instead.
So what does a green bank do?
In a nutshell, green banks are investment banks that aim to speed up transition to clean energy and fight climate change. They use private and public funding to help finance renewable energy projects.
These establishments are built on a finance model that runs on philanthropic and public funds to get clean energy projects moving. Speed is part of the mission, so they prioritize funding projects that are quite developed already and way past the research stage.
Who runs these banks?
It really depends on what you mean by run.
CGC, or Coalition for Green Capital, is a nonprofit that fights climate change by investing in the development of clean energy projects. This organization is the one that really kickstarted the green bank movement at the state level.
After the federal green bank legislation fell through, Hundt refocused his energy on state-level green banks, which eventually led him to founding CGC.
The Coalition has been leading the project for 10 years now, on local, state, and federal levels.
In terms of who’s running each individual bank — that seems to differ bank to bank.
How many green banks are there?
It’s hard to put a specific number on how many green banks there are because there always seems to be plans for more.
In the U.S., you can find out where each state is at in terms of establishing a green bank through Spot for Clean Energy’s State Policy Opportunity Tracker.
There seem to be at least ten states with green banks in them.
Globally, there seem to be three more: in Malaysia, the UK, and Australia. There also appears to be one being built in Rwanda.
Are these banks charities?
It’s important to stress that green banks are not charities. Their model exists on the premise that they’ll be paid back, and be able to pay back state and private funding they themselves have received.
Are they going to spread?
In December, there was talk of Biden proposing a national green bank, which would be modeled after Michigan’s Green Bank program, Michigan Saves — one of the most effective green bank programs in the country.
Through its lending to Michigan residents and its partnership with 16 credit unions, it’s issued about $270 million in loans with only 1.5% of borrowers defaulting. Michigan Saves set a goal to finance $1 billion in clean energy financing by 2023.
This seems to indicate interest in green banks going up, not down.