Photo by William Hsu
The devastation of the world economy due to the COVID-19 pandemic has led to unprecedented actions are taken by governments and public agencies around the world to preserve and protect businesses. What has become increasingly obvious is the lack of equity and equality in the distribution of resources within and between countries. Furthermore, the mainstream coverage of the post-pandemic recovery often misses the narrative around opportunities to create significant impacts in low-carbon economic development and social equality.
A key piece of support and planning for a recovery centered around an equitable low-carbon transition is green finance. Though traditional banks and large financial institutions are beginning to shift their activities towards sustainable development and clean energy technologies, the trail blazers of green finance are green banks, otherwise also known as climate funds. Green banks, such as the Connecticut Green Bank and The Atmospheric Fund, are gaining serious traction in cities and states around the world. These specialize financial institutions can take on a variety of forms from a strict public agency to a non-profit.
The advantages of these institutions are that they can focus and leverage a variety of sources of funding towards energy efficiency and clean energy projects. However, many green banks are still too narrow in the scope of their work and hamstrung by both the cost of their capital and the cost of projects. The larger green banks tend to focus on utility-scale projects like wind farms, while others focus on retrofits in buildings. Often, these green banks do not focus on social issues around the low-carbon transition due to cost and/or the narrow focus of their business operations. A glaring need is support for energy efficiency and clean energy projects in underserved communities. Yet, most green banks are unable to or unwilling to fully support projects in these communities. The newly established D.C. Green Bank is almost unique in its mission to focus on inclusive capital while supporting energy efficiency and clean energy projects.
This is a dissociation, like most financial institutions, between their capital and the impacts on the communities and the workforce. More effort is needed by green banks to track the social impacts of their capital. For example, is the project they are supporting using minority- or women-owned businesses? Is the project benefitting affordable housing or making housing more affordable? Is the project increasing employment in the low-carbon economy?
As the world begins to focus on the economic recovery beyond the COVID-19 pandemic, more support and focus should be given to green banks and climate funds to help develop business operations that focus on diversity and inclusion in the low-carbon economic workforce and decision making. It is not good enough to just support utility-scale projects when more work can be done in cities to increase employment and lower carbon emissions. It is not good enough that to create financing support around established low-carbon businesses. It is not good enough that the low-carbon workforce is dominated by men and male decision makers. It is not good enough that underserved communities are left behind in the low-carbon transition.
We can do better and we must do better. There’s an incredible opportunity presented with the pandemic to allow us to shift our workforce and businesses to reduce carbon emissions and protect the environment. We must think more holistically and creatively for options around green finance so that our collective capital is truly put to the best use to a sustainable and equitable future.