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The Greener Cities of Tomorrow Might Be Funded By Your Local Credit Union

Q&A: Neda Arabshahi of the Center for Resiliency and Clean Energy on what the Greenhouse Reduction Fund means for CDFIs and cities. 

By Erica Sweeney 

“The folks who’ve been excluded from the clean energy transition are often the ones on the front lines of climate change,” says Neda Arabshahi, vice president of the Center for Resiliency and Clean Energy at Inclusiv, a certified CDFI intermediary. 

To help these vulnerable communities, the Inflation Reduction Act signed by President Joe Biden in August includes $27 billion for green and energy-efficient projects. This Greenhouse Gas Reduction Fund will create new opportunities for CDFIs to expand their green lending programs and reach the communities most impacted by climate change. 

Arabshahi’s organization has built a network of credit unions with a mission to design climate change solutions and promote affordable, sustainable energy. They train community lenders on green lending, building capacity and infrastructure to meet the energy efficiency, resilience and climate needs of communities — and, they’re working on new programs to help community leaders best tap into the Greenhouse Gas Reduction Fund. 

We spoke to Arabshahi about the new funding, which should be available in the next couple of months, and how CDFIs can benefit. 

Why is the inclusion of funding for green lending in the Inflation Reduction Act such a big deal? 

We've seen our credit unions and their communities hit by climate events over and over again. They’ve responded by supporting their communities through things like emergency loans and rebuilding with efficiency and resiliency. We’ve been supporting them in building dedicated green loan products, energy efficiency, and solar and clean energy products that are affordable and accessible to the communities where they operate. 

The additional funding through the Greenhouse Gas Reduction Act will allow that work to really scale up dramatically. A lot of our members have developed loan products, but they might need some additional support. For example, a loan loss reserve fund to offer loans to harder-to-underwrite borrowers, or to hire staff and train them in green lending. 

We think the Greenhouse Gas Reduction Fund is really going to catalyze the green lending work. We've trained almost 300 community lenders in the past year and a half, and we always have a waiting list for our class. The demand has been huge. 

How can CDFIs leverage the new fund to reach vulnerable communities? 

This pool of dollars through the Greenhouse Gas Reduction Fund is dedicated at the national level. Community lenders are the perfect vehicle for understanding how to get the dollars to the right communities who need it the most — the low- and moderate-income communities and communities of color, and those on the frontlines of climate change and with the highest energy burden. 

They're already working in those communities. They’ve developed their lending practices, their mission and their structure from within their communities. They know how to have the highest impact with those dollars. 

With something like Greenhouse Gas Reduction Fund dollars, community lenders will not just reach those community members once, but they'll be able to finance an exponential number of projects. We’ve estimated that with the fund amount, lenders could leverage that amount of $20 billion to $200 billion dollars in investment.

How will it change the overall green lending landscape? 

We think almost every lender will be able to offer green loan products, helping the folks they serve to lower their utility bills, have lower-cost vehicles such as electric vehicles, and manage for electricity/grid interruption in their communities by having larger numbers of solar with battery-powered backup. 

Also, things like rebuilding with resiliency after there is a climate event. We’re seeing, for example, community lenders design loan products that incorporate renewables like solar into the rebuilding process in a way that they can only do because they understand the housing stock for their specific communities. So, I think this is going to trigger a lot of growth in this area. 

How have CDFIs responded to the news of the new funding? 

They’re excited! They just need more information. So, one thing that we're working very hard on is staying on top of this fund and how it's evolving to figure out how to get this money to CDFIs, minority depository institutions, and low-income designated credit unions. And, how to make sure that they’re represented in the planning of how this fund will be set up and make sure it's something that reaches them in a way that’s clear and easy to access. That’s one of our top areas of focus right now. 

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.