Colorado is going green in a whole new way. At a climate change conference in Poland late last year, Colorado Governor John Hickenlooper announced that the state would be implementing a Clean Energy Fund in 2019. Colorado’s the latest state to join an ever-growing list establishing green financial mechanisms. Green Banks, like the newly-formed Green Bank of Colorado, focus on funneling public and private funds into clean energy initiatives. This is a big financial step that could set into motion some of the goals of the Green New Deal.
The Green New Deal, or GND, is a proposal to restructure the national economy and reduce the impacts of environmental pollution. Colorado’s new green banking strategy is part of the state’s climate plan, which commits to reducing the state’s greenhouse gas emissions by more than a quarter by 2025. As even the proponents of the Green New Deal admit, widespread economic change is going to take massive public investment and policy overhaul. Green Banks are a step in that direction.
How do green banks work?
According to the National Renewable Energy Laboratory, “The ability to attract and leverage a greater amount of public dollars is often one of the hallmarks and typical motivations for establishing a Green Bank.” Typically, Green Banks intake funds from government agencies, non-profit foundations, grants, and private industry. Sometimes, funding comes in the form of bonds or surcharges on electricity. Green Banks then take those funds and invest them in projects that need financing for things like putting up solar panels or wind farms. There are often hurdles these projects face when trying to secure capital from the traditional banking sector, collectively called “green energy financing gaps.”
The Green Banking model closes some of those gaps by giving underserved populations a chance at funding. Often offering reduced interest rates, lower start-up costs, and incentives to private individuals, Green Banks make it easier for people to make energy-wise choices. Aside from the direct benefits of providing capital, these institutions also help standardize green lending practices and boost the introduction of new products. Harcourt Brown & Carey, a green energy financing firm out of Centennial, Colorado states that Green Banks provide, “solutions that improve the uptake and availability of projects currently available in the marketplace,” and “solutions that involve introducing new products previously unavailable to the marketplace.”
What are the benefits of green banks?
The benefits of Green Banks go beyond simply offering loans to finance green projects. If someone wants to start up a green business in a traditional banking economy, they may have to go to several sources to collect enough funding to finance their building, staff, and products. Green Banks collect funds from several sources and aggregate them in one place so they can be offered at a subsidized interest rate. If the green start up has an energy efficient building, the bank might offer credit for installation and upgrades. If an existing business wants to take a look at their carbon footprint, Green Banking might provide a clean energy assessment for their property.
Membership organizations like the American Green Bank Consortium are already focusing on adopting and sharing best practices, evaluating strategies, and consulting for the new Green Banks. Aggregating funds to provide to green businesses and carbon-conscious individuals also helps to raise awareness and education. It’s a bit like a snowball effect; establishing Green Banking enables green business growth, which in turn spreads awareness and education, eventually leading to increased interest in green practices. The more interest in these initiatives that gets generated, the more private investment follows. The National Renewable Energy Laboratory says, “These investments also mobilize private sector investment into a project by reportedly three to six times the amount of public sector dollars at work.”
Who’s already using green banks?
Colorado will be joining six states already using Green Banking: Connecticut, New York, California, Rhode Island, Maryland, and Hawaii. Who’s doing the best job? “Perhaps the best example of a state securitization program is the Hawaii Green Energy Market Securitization (GEMS) program which makes low-cost capital available to a broad range of participants including renters and lower credit score borrowers.” according to the Center for the New Energy Economy. Michigan already has a not-for-profit green bank, and Kentucky and Vermont are taking similar steps toward Green Banking. Massachusetts, Pennsylvania, and Virginia are also showing interest in following suit.
With continued public awareness and support, Green Banking is likely to keep spreading and helping companies reduce emissions, build wiser, and introduce better products. States that haven’t already adopted or incentivized Green Banking need to hear that their constituents are on board with green energy. States that have already established these institutions need to know they’re working and being utilized. The more public opinion and action boost the Green Banking system, the closer the country will be to a greener future.