If Pope Francis was the United States Secretary of the Treasury, he might have issued the Department of the Treasury's recent press release on April 22 with this comment from his encyclical “Laudato Si:” “Enlighten those who possess power and money that they may avoid the sin of indifference, that they may love the common good, advance the weak, and care for this world in which we live. The poor and the earth are crying out.”
The United States Department of the Treasury recently released its recommendations to update the Community Reinvestment Act (CRA) of 1977. They said the CRA was enacted out of “a desire to have financial institutions ‘play the leading role’ in providing the ‘capital required for local housing and economic development needs.’”
Today, there is an opportunity for the CRA to do more. It can provide capital that can reduce the burden of volatile energy costs on our families and businesses, create well-paying and meaningful businesses and jobs in our communities, and reduce greenhouse gases and local emissions to confront global climate change and environmental injustice.
A new vision for an engaged form of inclusive capitalism from national, regional, state and community banks could play a large role in advancing the green economy.
In its report “Financing Sustainable Development: Moving from Momentum to Transformation in a Time of Turmoil,” the United Nations estimated that the world will need to invest $90 trillion of public and private capital over the next 15 years to confront the worst effects of climate change. That is the equivalent investment of $800 per person per year.
The Paris Accord acknowledges the importance of capital in Article 2, which describes making financial flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.
And in cities and regions across the United States, through partnerships involving local government organizations such as green banks and investors in the private sector, capital is already flowing into key underserved segments of the green economy.
For example, a partnership between the Connecticut Green Bank (CT Green Bank) and U.S. Bank is demonstrating how innovative financial structures for unconventional but creditworthy customers can reduce the burden of energy costs on community-based organizations while also protecting the environment.
A 1.2 MW solar PV project at the New Britain campus of the Daughters of Mary of the Immaculate Conception will not only reduce greenhouse gas emissions, but it will also save $1.3 million in avoided electricity costs over the next 20 years.
Those savings will reduce operating expenses enabling the Daughters of Mary to provide more daycare services to the young and elderly as well as housing for the poor and disabled. It also provides shelter for those seeking refuge from domestic violence.
Another example is a partnership between the CT Green Bank and PosiGen, a company founded in New Orleans after Hurricane Katrina. This public-private partnership is demonstrating how the financial innovation of a solar PV lease in combination with an energy efficiency energy savings agreement (ESA) can make clean energy more affordable and accessible to low-to-moderate-income (LMI) families in distressed communities.
For our most vulnerable citizens, high energy costs are forcing families to choose between paying for utilities and purchasing essentials like food, housing and medicine.
This lease-and-ESA financial innovation is reducing the burden of energy costs on those who need it the most, including nearly 1,400 families who have seen nearly $40 million of investment in clean energy improvements in their homes through PosiGen and have now reduced their energy burden as a result of clean energy.
Due to its approach, the CT Green Bank has seen more projects and investment in clean energy occurring in low-income areas with less than 80 percent of the area median income (AMI) from 2012 to 2017, as shown by the data table below with information from its annual report.
For example, in FY 2012, the CT Green Bank was involved in 20 projects and $0.5 million in investment in low-income households.
In contrast, in FY 2017, the CT Green Bank’s annual report showed it and its private investment partners supported 1,838 projects and $78.5 million in investment in low-income households.
This was a huge increase over FY 2012 – 90x the number of projects and 150x the investment.
The potential for CRA investment in the green economy in Connecticut has improved due to public and private investments in clean energy that are reducing the burden of energy costs on families and businesses.
With results like these, Pope Francis might say, as he did in Laudato Si, “Strategies for a solution demand an integrated approach to combatting poverty, restoring dignity to the excluded, and at the same time protecting nature.”
Public-private partnerships have the potential to mobilize massive amounts of capital for the common good. If the United States Department of the Treasury improves CRA in ways that enable banks to expand affordable green-economy lending, then banks across the country, partnering with local governments, could play an even greater role in providing a gateway to inclusive prosperity. And that might just be an approach that Secretary Francis would bless.
Bryan Garcia, president and CEO of the Connecticut Green Bank, is in a leadership role on the advisory board of Clean Energy Finance Forum. He is the author of the essay "Inclusive Prosperity and the Green Economy – Reflections on Pope Francis’ Encyclical Laudato Si."