Are inexperienced investments so lame that they want devoted “inexperienced banks” to thrive? • Are you performed with that?
Essay by Eric Worrall
If renewable energy is almost always cheaper than coal, as most Greens insist, why are special government-funded banks needed to spur investment?
Solve the affordable housing crisis in America with green banks – and at the same time solve climate change
Published: Jul 18, 2023 10:30pm AEST
Tarun Gopalakrishnan Research Fellow, Climate Policy Lab, Tufts University
Bethany Tietjen Climate Policy Research Fellow, The Fletcher School, Tufts University
Seth Owusu-Mante Research Fellow in International Development, Tufts University
Green banks are attracting increasing attention in the US, especially since the federal government announced its first grant contests under a national green banking program to bring clean technology and more affordable energy to low-income communities.
But green banks can’t just help by installing larger solar and wind power generation.
Massachusetts is launching an innovative new green bank that could become a role model as states try to tackle two crises at once: lack of affordable housing and climate change.
While most green banks focus on clean energy, the Massachusetts Community Climate Bank is specifically focused on increasing the state’s stock of sustainable, affordable housing. It comes at an opportune time: States can now tap into billions of dollars in new federal funds for green banks under the Inflation Reduction Act.
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Read more: https://theconversation.com/using-green-banks-to-solve-americas-affordable-housing-crisis-and-climate-change-at-the-same-time-208098
If you’re wondering what exactly a green investment bank is, the OECD provides this unhelpful explanation.
Green Investment Banks
To harness the power of relatively limited public resources, over a dozen national and subnational governments have established public green investment banks (GIBs) and GIB-like entities. GIBs use innovative transaction structures, risk mitigation and transaction facilitation techniques, and local and market expertise to drive private investment, including from institutional investors, into domestic low-carbon, climate-resilient infrastructure.
POLICY OUTLOOK: GREEN INVESTMENT BANKS: USING INNOVATIVE PUBLIC FINANCE TO INCREASE LOW CARBON INVESTMENT
Investment in renewable energy and energy efficiency is growing, but not fast enough to put the world on track to achieve net-zero global greenhouse gas emissions by the end of this century. Mobilizing private sector investment will be key to achieving climate change targets. Governments can find ways to efficiently use available public funds to mobilize much larger pools of private capital.
The The OECD report “Green Investment Banks: Scaling up Private Investment in Low-carbon, Climate Resilient Infrastructure” aims to provide policy makers with the first comprehensive study of publicly capitalized green investment banks (GIBs) that explains why Mandates and financing activities of this relatively new industry are examined category of public financial institutions.
It offers a non-binding inventory of the multiple ways in which these public institutions are helping to mobilize and catalyze private investment in domestic green infrastructure, with a focus on energy efficiency projects. The report highlights the role of GIBs within a broader investment mobilization policy framework and also provides policymakers with practical information on how green investment banks are set up, capitalized and staffed.
A GIB is a public entity created specifically to facilitate private investment in domestic low-carbon, climate-resilient (LCR) infrastructure. GIBs direct private investment into low-carbon projects using innovative transaction structures, risk mitigation and transaction facilitation techniques, and local and market expertise. GIBs facilitate investments in areas such as energy efficiency retrofits for commercial and residential buildings, rooftop solar photovoltaic systems, and energy-efficient street lighting at the community level. Download the PDF version
Many of the investments mobilized by GIBs are made in urban areas, which in 2014 were home to 54% of the world’s population and are projected to be home to 66% by 2050.
Governments customize their GIBs based on their unique national and local contexts. GIBs and GIB-like entities have different motivations and goals, including meeting ambitious emissions targets, supporting local community development, reducing energy costs, developing green technology markets, creating jobs and reducing the cost of capital. GIBs use a range of metrics to measure and track their performance. These metrics generally focus on emissions saved, job creation, leverage ratios (ie private investment mobilized per unit of public GIB spending) and – for those GIBs that need to be profitable – yield.
GIBs are typically established in countries that lack national development banks or other entities that actively encourage private investment in domestic LCR infrastructure. They are relevant for both developed and emerging countries as a tool to achieve emissions, technology and infrastructure development and green investment goals. Establishing a GIB can send a signal to the market and other countries that a country or region wants to take a lead in expanding private low-carbon investments. To make serious efforts to mobilize low-carbon investment and embark on the path to net-zero emissions by the end of this century, governments need to think about how institutions like green investment banks can help them pick up the pace.
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Source: OECD (Content Reproduction Terms)
Doesn’t Massachusetts have access to private banks that encourage sound commercial investments? Aren’t US banks providing the capital to drive the economically compelling green revolution? Or is Massachusetts spending all that money just to “send a signal”?
If private banks and private financiers are nowhere near embracing green investment on the scale needed now, how will establishing a green investment bank change their minds? Or do Green Investment Bank enthusiasts simply assume that private companies need a little guidance from the government to understand what a great opportunity green investing is? What happens when that “leadership” fails and private companies don’t respond in the way public sector green bankers hope?
I really hope Massachusetts taxpayers pay attention to what the state government is doing with their money. Because someone has to pay for all this.
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