| COMMUNITY BENEFIT | Affordability, Decarbonization |
| KEYWORDS | Clean energy, Decarbonization, Financing |
| REGION | State |
| AFFORDABILITY STRATEGY | Funding/Financing |
| OVERSIGHT | State Treasurers, Governor |
| POLICY MECHANISM | Executive, Legislation |
Why This Matters
Funding is sorely needed to effectuate deployment and scale up climate solutions across various aspects of the energy transition. In the absence of direct public funding, many types of investments and projects, such as energy efficiency upgrades and renewable energy deployment, may be well-suited for financing via low- or no-interest loans which can be repaid via bill savings or revenue generated from the project.
Policy Solution
Specialized public or quasi-public financial institutions with expertise in climate financing can help meet unmet funding needs to support the energy transition. Green banks may use a range of mechanisms to deploy funds for climate action, including revolving loan funds, loan guarantees, and credit enhancements.
Model Policy Features
- Capitalization via public funds, or mix of public and private funds.
- Transparent and accountable governance.
- One-stop shop for incentives, financing, and technical assistance for clean energy upgrades such as residential and community solar, energy storage, energy efficiency, electrification and weatherization.
- Lines of credit for small businesses, such as electricians, HVAC contractors, and solar installers.
- Targeted outreach and programs for Minority-Owned Business Enterprises (MBEs), Disadvantaged Business Enterprises (DBEs), and/or Women-Owned Business Enterprises (WBEs).
- May lend directly to borrowers or partner with Community Development Financial Institutions (CDFIs) or other financial institutions via participation loans or by providing loan guarantees or credit enhancements, to scale the impact of lending.
Potential Limitations & Pitfalls
- In their relatively short history, green banks in the United States have shown success in helping low- and moderate-income single-family homeowners access and benefit from rooftop solar,1 but have yet to establish a record of serving low-income renters and environmental justice communities.
- Unlike banks that hold deposits, green banks cannot create money by re-lending deposits, so green banks require more capital to achieve the same lending impact (but also have fewer regulatory requirements).
- As with other programs that introduce new investment into disinvested areas, there is a significant risk of displacing and disrupting existing communities.
Complementary Policies
Policies that may benefit from green bank funding include:
- Low-income solar+storage, pre-weatherization, weatherization, pre-electrification, electrification, demand response, and rental efficiency standards, among others, all of which may utilize green bank financing to support upfront costs of clean energy measures.
Additional Information
In 2022, Congress enacted the Inflation Reduction Act, which included the Greenhouse Gas Reduction Fund (GGRF), a landmark program providing $20 billion in funds for green banks, CDFIs, and other financial institutions to scale up domestic climate finance capacity and deploy clean energy and climate projects, including the $6 billion Clean Communities Investment Accelerator (CCIA), which required 100% of funds to be deployed in low-income and disadvantaged communities.2 However, the second Trump Administration took a series of highly-contested and unprecedented actions to “freeze” awardees’ funds in their private bank accounts;3 as of November 2025, almost the entire $20 billion remains frozen while litigation proceeds.
Examples
1. Connecticut Green Bank – Connecticut Green Bank, Public Act No. 14-94: An Act Concerning Connecticut’s Recycling and Materials Management Strategy, the Underground Damage Prevention Program and Revisions to Energy and Environmental Statutes
Details:
- Created by the Connecticut Legislature in 2011 as the nation’s first green bank (with modifications in subsequent legislation) and initially funded by a utility surcharge as well as proceeds from the Regional Greenhouse Gas Initiative.4
- Programs include:
- Smart E-Loans for a wide range of home improvements, from insulation to heat pumps to floodproofing, with no money down and low-interest financing.5
- Issuing “Green Liberty Bonds” to support the Small Business Energy Advantage program, allowing small businesses and municipal customers to borrow up to $500,000 for energy efficiency upgrades.6
- Commercial Property Assessed Clean Energy (C-PACE), a program where municipalities partner with the Connecticut Green Bank to provide financing for commercial building owners to invest in clean energy upgrades, which is repaid via an assessment on the property tax bill.7
LIMITATIONS:
- As mentioned above, while the Connecticut Green Bank has had success with solar lending for low- and moderate-income homeowners, it has yet to establish a proven record of benefiting low-income renters and environmental justice communities.
Resources
- For an overview of best practices for equity and governance, see:
- Just Solutions. (2023). GGRF Best Practices Pledge and Equity Alliance.
- Green Bank membership organization:
- For an evaluation and suggested metrics for equity and justice in a county-level green bank, see:
- Kirsch, N. (2022). Assessing Racial Equity and Social Justice in Montgomery County Green Bank Programs. Prepared for the Montgomery County Council.
- For guidance to Governors for establishing and supporting state green banks:
- National Governors Association. (2023). Green Banks: An Overview for Governors.
- For guidance on financing clean energy transitions with state-level green banks, see:
- Climate Cabinet Education. (2025). State Economic Power Project Resources: Green Banks and Other State Financial Instrumentalities.
Written: November 2025
- Clean Energy States Alliance. (2020). Building a State Solar Program for Low- and Moderate-Income Homeowners: Replicating Connecticut’s Success. White Paper. ↩︎
- Pub.L. 117-169 § 60103. Congress directed an additional $7 billion within the GGRF for a program implemented by EPA as Solar for All, which EPA separately sought to terminate in August 2025. Nolette, V. (2025, Oct. 31). Four Solar For All Lawsuits: Two Distinct Forums and Legal Theories. Sabin Center for Climate Change Law, Columbia Law School. ↩︎
- Guarna, O. (2025, Sep. 4). Court of Appeals Sets Aside Preliminary Injunction in GGRF Litigation. Sabin Center for Climate Change Law, Columbia Law School. ↩︎
- NRDC. Connecticut Green Bank. Accessed: November 10, 2025. ↩︎
- Connecticut Green Bank. Smart-E Loans. ↩︎
- Connecticut Green Bank. Connecticut Green Bank. ↩︎
- Connecticut Green Bank. C-PACE. ↩︎