By Ray Birch
NEW YORK—The number of credit unions offering environmentally friendly products over the next six years is likely to double or even triple, according to Inclusiv, which received $1.87 billion in funding from the government to put toward the development of green programs.
Neda Arabshahi, SVP for Inclusiv’s Center for Resiliency and Clean Energy, is predicting that will place so-called green products and services, such as solar loans, on the same level as mortgages and auto loans within six years.
As CUToday.info reported, Inclusiv has been selected by the Environmental Protection Agency (EPA) for $1.87 billion in funding through the Greenhouse Gas Reduction Fund (GGRF) Clean Communities Investment Accelerator (CCIA). The grant is aimed at enabling community development credit unions to deliver energy efficiency, electrification, and solar access to consumers, homeowners and small businesses to reduce carbon emissions and generate clean energy in their homes, transportation and businesses.
Largest Grant Ever
“This is the biggest grant Inclusiv has ever received. It is monumental,” Arabshahi said. “This program is also one of the biggest, if not the biggest, federal investments to date within the community lending space.”
This $1.87-billion grant is structured so that at least 90% of those funds will be directly passed through as grant dollars to credit unions to build green loan programs and capitalize on those green loan programs, Arabshahi explained, adding the dollars will not only drive the green products themselves, but also help credit unions to hire staff to manage the new offerings.
“What we're envisioning is that hundreds of community development credit unions will be able to receive these grants from Inclusiv, and they will be able to serve hundreds of thousands—if not millions—of households and small businesses around the country to help them have affordable access to clean energy and energy efficiency solutions,” Arabshahi said. “Once these credit unions have received these capitalization funds, they'll continue to have loan capital for years to come to continue to finance projects. This will help credit unions start their programs, but it will mean their communities will continue to have access to affordable green finance, hopefully, in perpetuity.”
The Current State of Green
Neda Arabshahi
How many community development credit unions currently have green lending programs?
“A little over 300 have some sort of program—solar, home energy improvements, electric vehicles, or a combination of all of those,” Arabshahi answered. “As we look to what's rapidly approaching, we've been training lenders for the past four years, including community development credit unions, on how to build green loan products. So, we know many more have a plan to launch a green loan product very soon. Many have been working on it for months, maybe even over a year.
“Now, these funds will enable them to launch more quickly and launch maybe bigger than what they had originally planned,” she continued. “We believe that during the six-year term of the program we'll see the number of credit unions offering a green program double or maybe even triple.”
Markets Expected to Develop
Arabshahi is forecasting all of that will lead to the development of local green markets around the country, particularly in CDFI target markets where low-income-designated credit unions are serving communities.
“Once those markets build, I think it is going to become pretty standard that most credit unions will offer green products, just in the same way they offer mortgages or auto lending,” she said.
A hurdle in the way of the expansion of green programs in credit unions, according to Arabshahi, is many believe they lack the resources to establish a green lending program and then to sustain it.
“We've done surveys on this and what we’ve found is a lack of demand,” she explained. “But, again, we’ve learned, that is based on credit unions believing they don’t have the staff, training or knowledge—and basically the capacity—to build and underwrite the green products.”
A ‘Waiting List’
Inclusiv launched its program for training and technical assistance for green lending programs, including solar lending, in 2020.
“We thought it would be really hard to get interest, but as soon as we started the effort we've had a waiting list for our training courses,” Arabshahi said. “We have trained over 700 lenders. The demand has been growing.”
Arabshahi said credit unions not only want to serve individual members with green products, but another market, as well.
“They see a big opportunity to build strong relationships with small businesses via green offerings,” she said.
What’s Required
Arabshahi pointed out the program requires 100% of the funds to go to low-income and disadvantaged communities.
“These dollars will help credit unions lower the cost of green loans for low-income and disadvantaged communities through things like reduced and lower-than-market interest rates,” she said. “They can offer interest rate buy downs, partially forgivable loans…there are all sorts of different ways to reduce the cost to the borrower that these funds make possible.”
According to Arabshahi, Inclusiv’s program will provide overall training technical assistance and support “at every step of the way. While the credit union is building their loan product they're also able to tap into a local market that's growing and evolving?”
How it Works
How does this program work?
“We will have a lot more details in the coming months,” Arabshahi said. “But, high level, credit unions will connect with Inclusiv. We will provide some guidance on how to think through what a green loan program would look like. We would help them connect that to their own asset size and membership base and the types of communities that they serve. That will help them to build a business plan. Once they're ready, once they understand the space and build their plan and conceptualize their loan product, we provide training and technical assistance—one-on-one guidance.”
The Next Step
Once the credit union reaches a point where it’s ready to fill out a grant application, it would submit the app to an independent grant review committee.
“The committee is independent from Inclusiv,” Arabshahi stated. “Grant review committee members will review the applications, and then, hopefully, the credit union will get approved. And then, they'll receive technical assistance and capitalization dollars.”
Arabshahi said the tentative start date for the program is sometime in July, although that could change.
What will Inclusiv and the committee be looking for when a CU applies?
“The most important criteria will be an understanding of, and accountability to, those low income and disadvantaged communities,” Arabshahi said. “So, the ability to responsibly lend in the target communities—have a true commitment to serve those communities, that will be most important.”