Green Banks' Funding Is in the Trump Administration's Crosshairs – GreenBuildingAdvisor

The Environmental Protection Agency (EPA) is coming after America’s green banks. Once you’ve had a moment to process the naked irony of this statement, let us review the facts and what has transpired of late.

Green banks have long been considered a reliable institutional response to the climate crisis. Principally funded with taxpayer money, these quasi-public banks leverage public funds to attract private capital, which is then invested in green projects, from renewable energy to the construction of energy-efficient homes. Borrowers typically get lower interest rates on loans, commensurate with a 10-year Treasury note, and flexible payback periods.

While the U.S. doesn’t have a federal green bank of its own, they exist in most states and are typically approved by state legislators (although some are nonprofits), meaning the federal government has no legal say in how those institutions lend money. The closest thing the U.S. has to a federalized green bank arrived in the form of the EPA’s Greenhouse Gas Reduction Fund, a $27 billion grant program established through the 2022 Inflation Reduction Act.

Of those funds, $20 billion in grants were awarded last year to various organizations whose missions range from funding clean energy projects and small businesses to building affordable housing in disadvantaged communities. The awardees were broken up into two blocks: the National Clean Investment Fund (three nonprofit recipients totaling $14 billion), and the Clean Communities Climate Accelerator, comprising bulk grants totaling $6 billion that went to five Community Development Financial Institutions (CDFIs). Now, the EPA wants that money back.

Putting the brakes on climate-forward investment

CDFIs are mission-driven lending institutions (private banks, credit unions, et al.) situated in low-income urban neighborhoods, rural areas, small towns, Native communities, and other underserved locales that traditionally have fewer banking options. They were established and signed into law in 1994 and have proved instrumental in funding thousands of small businesses, healthcare clinics, childcare centers, affordable housing developments, and more. Today, nearly 1450 CDFIs are in operation in all 50 states plus the District of Columbia and Puerto Rico.

On March 14, the Trump administration issued an executive order to reduce the scope of the federal bureaucracy. This includes eliminating the Treasury Department’s CDFI Fund “to the maximum extent consistent with applicable law,” the order read. This effectively stalls billions in funding that had already been approved for smaller, mission-driven community lenders throughout the country.

Last June, following the Biden administration’s announcement of these grants, I connected with Donna Gambrell, CEO of Appalachian Community Capital (ACC), an intermediary CDFI that raises capital and awards grants to smaller CDFIs and other nonprofit lenders. Gambrell’s organization was awarded $500 million as part of the Climate Accelerator program. At the time, she spoke to CDFIs’ role in uplifting communities that have been outside the financial mainstream for generations. Now, with the EPA terminating its grant, close to “$300 million in funding requests from community lenders across Appalachia and rural America” have been recalled, according to a prepared statement by ACC and its subsidiary Green Bank for Rural America.

“These investments would provide the good jobs, local wealth-building, and economic stability that Appalachian and rural communities need,” the statement reads. “Yet, despite these clear economic benefits, the EPA has moved to cancel obligated funds awarded through a rigorous, transparent, and highly competitive process.”

Another Climate Accelerator grant recipient, Opportunity Finance Network, which was awarded $2.29 billion to establish a Climate Lending Investment Mobilization (CLIMB) assessment tool, issued its own statement to the executive order. “CDFIs are financial first responders,” it reads. “This was especially true in 2020 when the Trump Administration called upon CDFIs to help preserve jobs, keep businesses open, and stabilize communities. CDFIs also continue to be on the front lines of disaster response.”

Meanwhile, all three organizations awarded grants through the National Clean Investment Fund—Climate United Coalition ($6.97 billion), Coalition for Green Capital ($5 billion), and Power Forward Communities ($2 billion)—saw their Citibank accounts frozen by order of the EPA as early as February 18. All three have filed lawsuits against the EPA and Citibank.

While the rescinding of these grant monies—assuming the executive order is legal, which is highly questionable since the funds were approved by Congress—does not stop individual CDFIs and green banks from conducting businesses and issuing loans, the sudden absence of the federal government as a trusted partner in these transactions speaks volumes. By labeling the CDFI Fund “unnecessary” and a “slush fund” (or EPA administrator Lee Zeldin’s preferred label of “gold bars”), this administration is declaring zero interest in investing in the very districts and communities that propelled Trump to office for a second term.

According to Jeannine Jacokes, CEO of Community Development Bankers Association, “CDFIs cannot expand economic opportunity on ‘Main Street America’ without the CDFI Fund … [They] have the unique ability to go deep into markets and promote recovery.”

Pushback in red districts

Setting aside the fact that the CDFI Fund is part of a federal banking framework that was enshrined into law more than 30 years ago, the prospect of reining in these U.S. Treasury dollars to any degree has a lot of people spooked.

More specifically, many U.S. representatives and senators representing deep-red districts and/or states—including active members of the House Financial Services Committee—are pushing back, proclaiming the CFDI Fund a lifeline for rural and underserved populations. The reason for this is simple: CDFIs increase access to capital for millions of small business owners, builders, contractors, farmers, and all manner of community nonprofits. As it concerns housing, CDFIs have been instrumental in financing the building and purchase of manufactured homes for decades and notably became one of the few banking institutions to increase its lending activities during the Great Recession years of 2007–2009.

Another consideration is the fact that nearly two-thirds of all CDFIs in the country are in Republican-led districts. Should the Trump administration’s tariffs and other isolationist economic policies contribute to an economic downturn, CDFIs will have an important role to play, just as they did during the Great Recession and the Covid pandemic.

On March 20, current and former EPA staff published an op-ed condemning Trump for halting funding on the legally tenuous grounds that those grants were “no longer consistent with EPA funding priorities.” Asking to remain anonymous for fear of reprisal, the authors wrote, “It is a waste of taxpayer dollars for the U.S. Government to cancel its agreements with grantees and contractors. It is fraud for the U.S. Government to delay payments for services already received. And it is an abuse of power for the Trump administration to block the IRA laws that were mandated by Congress.”

Justin R. Wolf is a Maine-based writer who covers green building trends and energy policy. He is the author of Healing Ground, Living Values: Stanley Center for Peace and Security, published by Ecotone.