Climate VCs weigh the impact of Biden's green bank fund

With the recent allotment of $20 billion to establish a national green banking program, the Biden administration is looking to help de-risk climate tech investment and spur private capital.

Issued under the Greenhouse Gas Reduction Fund, the funding is set to channel capital into clean energy projects with almost $7 of private capital mobilized per $1 of federal money.

• The top line: The Biden administration expects that the fund will ultimately transform the $20 billion in public funding into $150 billion in public and private funding over the next seven years — helping to de-risk renewable energy projects and other climate tech sectors for both consumers and investors. 
• The market grounding: Green banks typically lend funding to clean energy projects in underserved market sectors, where the projects might seem too expensive or too risky to attract private capital. Federal funding can help turn the tide. Clean financing systems like that set up under the GGRF can effectively help to de-risk investments into climate tech and clean energy projects. 
• The current take: The influx of federal funding will push the entire cleantech market into the next gear, explained Powerhouse Ventures Founder and Managing Partner Emily Kirsch. “For many decarbonizing technologies, the upfront cost remains a barrier to adoption even when the total cost of ownership is lower than alternatives,” Kirsch said. “This funding will help those technologies blast through that barrier.” 

The grant funding is the largest non-tax investment in the clean energy economy to date, with over 70% of the money flowing into low-income and disadvantaged communities. $14 billion from the National Clean Investment Fund is set to initiate the creation of three nationwide green banks focused on financing accessible and affordable cleantech projects. The remaining $6 billion will be distributed via the Clean Communities Investment Accelerator, which will connect community lenders to climate tech funding; 100% of capital under the CCIA is dedicated to underrepresented communities.

Eight organizations will be receiving the funding — three under the NCIF and five through the CCIA — focused primarily on three priority areas: distributed energy storage, building decarbonization, and net-zero transportation. 

A battle for backing

Kirsch said she expects the federal funding to help reshape the broader climate tech market in a number of ways. First, she said, there’s likely to be better interest rates for debt financing.

“We're going to see low interest rate loans — and even 0% interest rate loans — which will make clean energy and mobility investments attractive to a wider set of customers,” Kirsch explained. “And, we'll see the majority of those loans made available to communities and organizations that historically haven't received their fair share of decarbonization investments.” 

The funding will also prove a boon to still-emerging supply chains and project pipelines, including in more nascent tech sectors, she added. “As companies do more projects, supply chains get stronger, workers gain critical skills, and consumers get more comfortable with new decarbonizing technologies."

Buoyant Ventures Co-Founder and General Partner Allison Myers echoed Kirsch’s sentiments: 

“This [funding] will especially help projects that have higher upfront costs and lower operational costs,” she said, noting that higher interest rates have recently impacted projects with a higher capex than opex, like rooftop solar. 

Coupling cash, community, and clean energy

Kirsch and Myers both stressed the equity aspect of the GRRF funding; making clean energy projects both more affordable and more accessible is critical to ensuring no community is left behind as decarbonization picks up steam. 

“It's really inspiring when you look through the applications of the program recipients,” Kirsch said. “Thanks to this capital, we're going to see more electric school buses, more EV charging infrastructure for those who don't own a single-family home, more multifamily buildings decarbonized, more small businesses and farms investing in energy upgrades, and ultimately healthier air and lower carbon emissions for everyone.” 

That new movement will ultimately trickle down from the hardware and infrastructure side of climate tech and into the digital layer, benefiting many of the companies in Buoyant’s software-focused portfolio, Myers added. “We think GGRF will make it easier to finance and deploy climate solutions to a larger population,” she explained. “As more hardware gets deployed, the software solutions we invest in become even more useful for managing this new equipment or making it more efficient.”