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L.A. Credit Union Is Taking a More Equitable Approach to Financing Our Green Future

Those who can benefit the most from lowering their cost of energy are those that are struggling with the high cost of housing here in Southern California.

By Bianca Gonzalez

The USC Credit Union, a certified CDCU and CDFI, recently developed several green lending products that make emission-reducing energy upgrades more equitable for communities near the University of Southern California campus in South Los Angeles and East Los Angeles. Created by Biden’s 2021 Inflation Reduction Act (IRA), the Greenhouse Gas Reduction Fund creates the opportunity for CDCUs and CDFIs to take on more risk and ultimately bring emission-reducing and cost-effective energy products to communities that need them most.

The IRA has provided the Environmental Protection Agency with $27 billion for the Greenhouse Gas Reduction Fund. Through competitive grants, the fund will support financing clean energy and climate projects that reduce greenhouse gas emissions. This program will meet the requirements of the Justice40 Initiative, Biden’s commitment to delivering 40% of the benefits of specific federal investments to disadvantaged communities.

While the difference is narrowing, a 2021 study on US solar adopter patterns from Berkeley Lab and the U.S. Department of Energy shows that solar adopters tend to be higher income. In 2019, the annual median solar adopter income was about $113,000, while the overall U.S. median income was $64,000. The difference in annual income between solar adopters and the general population fell from $72,000 in 2010 to $49,000 in 2019, demonstrating that lower-income communities still need equitable solar upgrade solutions.

Many USC Credit Union clients have been left behind by traditional financial institutions, disproportionately impacted by climate change, and underserved due to a lack of accessibility for Hispanic and immigrant populations. These three factors highlight an opportunity for CDFIs to meet the intersectional need for green lending in low-income Hispanic communities.

“South Los Angeles in East Los Angeles are now primarily Latino communities,” says Gary Perez, CEO of USC Credit Union. “Several decades ago, the South Los Angeles area was primarily an African American community. So as the racial makeup of the community has changed, we felt that we had to understand more about the needs of the Latino community. We turned to Juntos Avanzamos for counsel.” 

Juntos Avanzamos is a designation for credit unions committed to serving Hispanic and immigrant consumers. USC Credit Union became a designated Juntos Avanzamos CDCU, which was created by Inclusiv, a CDCU membership organization and CDFI intermediary. 

“We had to understand more about the needs of the Latino community, especially the first and second generation members of that community,” Perez says. Despite how convenient remote banking tools are, “the general consensus is that these individuals prefer to bank in person. Why would these people prefer to commute to a bank? Our thesis is that they can’t access the same tools that English preferred or English native people can. So we've developed a new bilingual mobile banking system.”

Coupled with accessibility tailored to the Latino community, grant funding from the Greenhouse Gas Reduction Fund would allow USC Credit Union to take on even more risk and grant loans to their clients with an even wider variety of financial circumstances.

The grant funding “would be used as loan loss reserves and would allow us to make loans to credit-challenged or income-challenged individuals who may have nontraditional sources of revenue,” Perez says. “We feel very strongly that this type of application of IRA funds will do more for the inner city community.”

While the Greenhouse Gas Reduction Fund will aid in developing financial products to a variety of community financial institutions, according to Neda Arabshahi,  Vice President of Inclusiv, the financial products need additional support. “They need to be paired with technical assistance, training, help with how to vet contractors, how to build partnerships with the providers of clean energy services and education of consumers,” Arabshahi says. 

Perez and other USC Credit Union leaders completed the Virtual Solar Lending Professional Training and Certificate Program, which was developed by the Inclusiv’s Center for Resiliency and Clean Energy and the University of New Hampshire (UNH) Carsey School of Public Policy Center for Impact Finance and partly funded by the U.S. Department of Energy Solar Energy Technologies Office.

“Those who can benefit the most from lowering their cost of energy are those that are struggling with the high cost of housing here in Southern California,” Perez says. “By providing more accessible solar financing, we can help lower the energy costs for those individuals and allow them to maintain households in this expensive L.A. market.”

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.