Contributor James McIntyre joins the CFB this week.
The fight against climate change demands innovative financial models, and the EPA’s Greenhouse Gas Reduction Fund (GGRF) aims to leverage a relatively new network of green lenders across the U.S. These lenders can benefit from traditional public finance markets to achieve their goals. GGRF encourages local lenders and climate banks to support projects that combine environmental stewardship with racial equity, backed by a $27 billion allocation. Securitization will be essential for maximizing the program's impact.
To succeed, GGRF awardees will originate pooled loan funds, already used by municipal and state agencies. These funds, employed by state housing finance agencies, state bond banks, and state clean water State Revolving Funds (among others), aggregate loans from multiple borrowers, enhancing credit quality and reducing borrowing costs through various mechanics. By adopting this model, substantial financial resources can be mobilized to address climate change.
Yet, to date, the silo of community development has largely not communicated with the silo that is public finance. The exception to that is with state bond banks and financing authorities that were named as sub-awardees of the National Clean Investment Fund. That will hopefully change soon - and in this week’s Brief, we offer specific models from which that conversation can start.