What is a Green Bank?
With the Greenhouse Gas Reduction Fund (GHGRF) underway, you may be hearing more about green banks—mission-driven financial institutions that accelerate clean energy adoption by providing access to capital. But how exactly is a green bank different from any other bank?
Most are familiar with traditional banking, wherein a person deposits money into a checking or savings account and the bank provides loans to borrowers. A traditional bank typically lends money out in the form of car loans, credit cards, mortgages, and business loans. It’s no surprise that most banking institutions are in the business of making money.
Green banks, by contrast, are particularly driven by the mission to combat climate change. Similarly to the GHGRF, they do this by facilitating private investment into low-carbon, climate-resilient (LCR) infrastructure and other green sectors (including clean energy and waste management) and mobilizing that investment into underserved markets to fill financial gaps.
According to a 2016 report by the Natural Resources Defense Council, green banks have the following characteristics:
- Narrow mandate – generally focused on LCR investment
- Independent – granted independent authority to meet their mandates
- Additionality – facilitate transactions that wouldn’t otherwise happen by “crowding in” private capital only to fill market gaps
- Cost-effectiveness – use low-cost solutions to reduce public expenses
- Accountability – public reporting and transparent calculation methodologies to build credibility
- Capitalized with public funds – often from federal, state, or local governments
- Built to serve local policy and market needs – established to deal with market failures and barriers preventing LCR investment
Designed to leverage private capital – use as little public and low-cost capital to achieve investment goals
Colorado’s Green Bank
There are currently a number of green banks at the state, local, and international levels. Colorado Clean Energy Fund is Colorado’s green bank, focused on supporting Coloradoans in their efforts to transition to clean energy. CCEF offers a portfolio of commercial loan products and residential loan programs to provide equitable access to clean energy solutions. Learn more about our financial offerings here.
By investing in environmental projects that effectively reduce greenhouse gas emissions, we are doing our part to mitigate the climate crisis and ensure that Coloradoans statewide have the capital they need to electrify their homes and businesses.