Green banks are entities that provide financing and technical assistance to clean energy or energy efficiency projects to earn a profit themselves, or to finance additional rounds of funding. Many states and cities already have green banks. The Connecticut Green Bank, established in 2011, lent $36.8 million in 2020 and attracted $275.7 million in private investment. The goal of green banking is to use public funds to leverage private investment. Connecticut’s bank installed 81.6 MW of renewable electric capacity in 2020 through this effort. The initial use of public money reduces risks for investors and demonstrates the viability of clean energy projects. A recent report by the National Academies of Science endorsed this approach and called for a green bank at the federal level.
There is debate among proponents, however, about the best path forward. Depending on the enabling legislation, a federal green bank might only be allowed to lend to state or city banks—like the one in Connecticut—rather than directly financing its own projects. Proposals also split on whether the federal bank should be a government agency or a nonprofit corporation, financially independent of the Treasury.
Finally, the mission of a federal green bank would be crucial. Some proponents want it to both generate public and leveraged private investment and to be a coordinating vehicle for the industrial policies to install charging stations, weatherize homes, and update the grid. These proponents draw on the National Investment Authority (NIA) proposed by Saule Omarova and Robert Hockett. The NIA would also be a public asset manager or equity firm which offers financial markets alternative instruments into which investors could shift their portfolio investments. Other green bank advocates stick to what they see as the core mission: institutionalizing a source of finance that is independent of Congress’ temperamental budget process. A group of senators--including Ed Markey (D-MA) and Congresswoman Debbie Dingell (D-MI)—recently introduced the “Clean Energy and Sustainability Accelerator Act” that would fund a new nonprofit bank with $100 billion in public money and earmark 40 percent of the funds for communities “disproportionately affected by environmental pollution, climate change impacts, or economically reliant on a fossil fuel-based industry.” As the Biden-Harris Administration considers how its infrastructure package could tackle climate change, a federal “green bank” might well be in the cards.
