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Ensuring Low-Income Communities Get Their Share of the Green Energy Pie

Greenhouse Gas Reduction Act funds will soon be flowing into communities. These CDFI leaders want to make sure their communities don’t miss out. 

By Erica Sweeney 

Low-income communities and people of color are more likely to live in areas affected by flooding, poor air quality, and extreme temperatures, according to the U.S. Environmental Protection Agency (EPA). And, these negative effects of climate change are intensifying. 

To help find solutions, the newly launched Justice Climate Fund strives to ensure that the communities that need it most benefit from the Greenhouse Gas Reduction Fund, a federal program providing billions of dollars from the EPA for clean energy and climate projects. 

The Justice Climate Fund is an initiative led by the African American Alliance of CDFI CEOs and the Community Builders of Color Coalition, a national network of dozens of financial institutions and advocacy groups led by people of color. 

“The Justice Climate Fund is historic,” says Lenwood V. Long, Sr., president and CEO of the alliance. “Organizations are coming together to say that we represent not only diversity, equity, and inclusion, but we’re ready and positioned to access funds from EPA.” 

They’re dedicated to reducing greenhouse gas emissions and creating lasting health and economic benefits for low-income and disadvantaged communities nationwide, he adds. 

Black and Brown-led CDFIs are best suited to take on this work since these organizations already work in low-income and disadvantaged communities, Long says.

“We represent,” he adds. “We are the presence, in terms of our work, in terms of our trust development. We live on Main Street, and we don't parachute in and extract from Main Street.” 

The Justice Climate Fund is bringing CDFIs and community lenders together to create a strategy for “how we think we could be achieving the goals of greenhouse gas reduction in a way that’s most impactful for reducing emissions and most impactful for improving equity and positive outcomes in low-income communities and communities of color,” says Cathie Mahon, president and CEO of Inclusiv, a founding member of the Justice Climate Fund. 

As part of the $27 billion Greenhouse Gas Reduction Fund, $6 billion is devoted to the Clean Communities Investment Accelerator (CCIA), which will award grants to CDFIs, credit unions, green banks, minority depository institutions and other organizations to “build the capacity of community lenders to do more green lending and strengthen their engagement around climate action,” Mahon says. 

The $14 billion National Clean Investment Fund (NCIF) will provide awards to national nonprofits that will offer financing to businesses, communities, and community lenders. At least 40% of the investments must benefit low-income and disadvantaged communities. 

Oct. 12 is the deadline for CCIA and NCIF applications. The EPA is expected to make award decisions by March 2024, and program funding will start by July 2024.

The funding will support projects like green retrofits of affordable housing, solar expansion, creating green jobs, growing green businesses and technical assistance, Long says. The goal is to address environmental and climate-related health issues that disproportionately affect disadvantaged communities, boost workforce development and build local green economies. 

CDFIs and community lenders are the “stewards of capital for our communities,” Mahon says. “The Justice Climate Fund came together to make sure that the structure of the financing is defined by the community lenders on the ground.” 

Building a sustainable, long-term green lending marketplace is a central initiative of the Justice Climate Fund, she adds. “Our goal is to build the capacity, do the training, provide seed capital, and ultimately, support our members to access the NCIF directly, and create the opportunity for secondary market vehicles for our lenders.” 

What’s significant about the EPA’s initiative is that it recognizes the vital role of CDFIs and community lenders in the communities that they’ve served for decades, Long says. 

“This is an opportunity to bring true equity in the distribution and allocation of resources in low-income communities that you have not seen,” Long says. “If we do this right, there will be a tremendous shift in health in terms of cleaner air, clean water, but also a shift in the economy with new jobs and a transformation of jobs in low-income and disadvantaged communities that’s unprecedented.”

This story is part of our series, CDFI Futures, which explores the community development finance industry through the lenses of equity, public policy and inclusive community development. The series is developed in partnership with Next City.