Economic Development

Community Development Finance Institutions Can Play a Key Role in Climate Finance

October 26, 2023  • Sarah Zetterli & Rossana Espinoza

“By 2028, 100% of CDFIs should become climate lenders,” said Harold Pettigrew, CEO of Opportunity Finance Network (OFN), in a rousing call to action at last week’s Conference in Washington, DC. Pettigrew, head of the network of more than four hundred community-based financiers, called on all Community Development Finance Institutions (CDFIs) in the United States to turn their attention to climate finance. This would put into action the truth voiced by another speaker, EPA administrator Michael Regan, that “Environmental justice is economic justice.”

The backdrop for Pettigrew’s push is the new Inflation Reduction Act, in particular its inclusion of the Greenhouse Gas Reduction Fund, a competitive grant program with $27 Billion to be administered by the Environmental Protection Agency (EPA) to community-based organizations. This once-in-a-lifetime line of funding is meant to ensure that CDFIs can provide last-mile green financing to the communities that need it most —rural and urban, Black and Brown, coastal and inland. “Just think,” Pettigrew extolled, “last year may have been the hottest year on record, but it was the coldest year for the rest of your life.”

CDFIs are financial institutions whose primary focus is economic opportunity and community development. They take a number of forms, including credit unions, nonprofit loan funds, banks, and venture capital firms. They finance small businesses, affordable housing developers, and community facilities such as day care centers and grocery stores; some also provide financial services to consumers and households. Their focus is on low-income communities and others left behind by our financial system including rural communities, racial and ethnic minorities, the disability community, and women. From the Native Hawaiian CDFI on the island of Maui, to the Florida-based CDFI in Hurricane zone, to the post-coal economy Appalachians, CDFIs are well-placed to respond in times of need. 

Pettigrew reassured the audience of more than 2,200 practitioners and industry partners that with his call to action they need not abandon their core lines of business; every small business loan and every affordable housing project they fund can have a clean energy lens. Brian Moynihan, CEO of Bank of America (which itself lends $2 Billion to the CDFI industry), said the community finance space need not be intimidated by the seeming complexity of the GreenTech or CleanTech space. Rather, he encouraged CDFIs to envision that one day every commercial building, every house, every school, every car, every bus will be net zero when it comes to greenhouse gas emissions. Looking out at the audience of community financiers, he said, “Think about how you can go to 100% renewable and the prospect of financing that portfolio is very exciting.” Duanne Andrade, CEO of the first-ever climate-focused CDFI, Solar Energy Loan Fund (SELF), said, “In Florida, I’m working at ground-zero for climate change.” Her work started with climate change mitigation strategies – with better roofing and storm-proof windows, home by home. The CDFI industry is poised to shape the Just Transition, ensuring that as money flows into a new green economy, marginalized communities are not left behind.