As local governments are acclimating to the likely federal funding pullbacks, especially for climate action, local government leaders are searching for new innovative ways to build resilient, sustainable communities.
Two innovative approaches to fund climate mitigation and resilience are “blended finance” and public private partnerships (PPP).
“Blended Finance” typically combines zero-payback grants or loans of below-market interest rates to attract private capital for investment by reducing risks for traditional investors. Blended finance can succeed in areas that address common or global challenges as well as creating a public benefit. In essence, blended finance acts as a catalyst, attracting private investors who might otherwise be hesitant to invest in projects or regions perceived as high-risk or with uncompetitive returns. This diversification of capital sources – or “capital stack” – can also be more resilient if one or more of the capital components become unavailable, as we are seeing with the likely disappearance of federal grants.
Public Private Partnerships (PPPs) often secure action, collaboration, funding and financing from private actors, and spread the financial risk of a project across multiple public, private, and nonprofit entities. Partnerships are well-suited for local governments that cannot or do not want to own their project outright, or that are willing to share possible cost savings and revenue generation with a third-party. These third parties can bring upfront capital – and avoid tax increases or alleviate the need for new muni bond issuances.
Public Private Partnerships can include:
- Advertising-Funded, such as ‘high tech’ LA bus shelters
- Power Purchase Agreements, seen in Fremont Firestation microgrids owned by Gridscape Solutions
- Energy Savings Performance Contracts, as in the Newark, Delaware $10 million municipal facilities project
- Program-Integration, as in the ValleyCan Self-Help Credit Union financing program
- Green Banks, as we will explain below in detail.
Green banks can transform clean energy financing by using innovative tools to attract diverse capital sources—private, public, and mission-driven. Green banks operate on two levels:
- directly funding projects through loans, credit enhancements, and co-investments
- indirectly strengthening the market by sharing expertise with community lenders to grow the clean energy finance ecosystem.
The result is expanded access to capital for local clean energy and resiliency projects and a more supportive lending environment. Many of the oldest green banks – New York, California, Connecticut, and Hawaii – are public private partnerships and are typically capitalized with blended finance. Other newer green banks – Michigan Saves, Energize Delaware, and The Clean Energy Fund of the Carolinas – are nonprofit financial institutions, blending public capital with philanthropic and private capital.
Green banks are different from traditional banks in five ways:
- Mission and investment focus: dedication to accelerating clean energy and resilience, rather than serving traditional banking needs like deposits and consume lending
- Funding sources: utilizing public, blended capital, grants and green bonds specifically allocated for environmental projects, rather than primarily customer deposits and traditional capital markets
- Risk approach: designed to serve a higher-need community and more complex projects that traditional lenders might avoid, which can help prove market viability
- Market development role: actively work to create and expand clean energy markets by standardizing financing approaches and reducing costs
- Structure: can be quasi-public or nonprofit entities with a public mission, whereas most traditional banks are for-profit institutions focused on shareholder returns.
The Connecticut Green Bank (CBG) is a quasi-public corporation and catalyst to help mobilize greater local investment to address climate change. As the nation’s first green bank since 2011, it makes clean energy more accessible and affordable for all Connecticut citizens and businesses by creating a thriving marketplace to accelerate the growth of the green economy. Individual investors across the country can invest via an online portal to earn attractive interest rates (recently 5% during 2024).
Connecticut Green Bank Liberty Bonds and Notes are investment products offered by the CGB to source capital for clean energy projects and provide a way for residents, businesses, and institutions to invest in growing Connecticut’s green economy. Both products are inspired by the “Series E” war bonds sold to Americans during World War II, and investment can be as small as $100.
The CGB program has shown strong investor interest, with more than $3.6 million raised through the Notes program alone as of 2025. The Connecticut Green Bank has structured these investments to make clean energy financing accessible to ordinary citizens. Full disclosure: in the past I have invested in CGB Liberty Notes, and may do so again in the future.
CGB Impact:
- Since inception through FY 2024, CGB has mobilized nearly $3 billion of investment into the state’s green economy, attracting $2.88 billion in private investment using only $409.4 million in Green Bank dollars, achieving a leverage ratio of $7 for every $1.
- More than 66,500 families and businesses have been able to reduce the burden of energy costs in their homes and buildings since 2011 through Green Bank programs.
- Through 2020, CGB investments led to the creation of over 22,500 direct, indirect, and induced job-years and generated an estimated $93.4 million in state tax revenues.
Other foundational quasi-public green banks include:
- New York Green Bank
- Hawaii Green Infrastructure Authority
- California CLEEN Center – Now part of the California Infrastructure and Economic Development Bank (iBank)
The Clean Energy Fund of the Carolinas (CEF Carolinas), which recently changed its name from NC Clean Energy Fund (NCCEF), operates as a nonprofit Green Bank to finance clean energy, energy efficiency and resilience projects by partnering with public and private investors, foundations, and existing financial institutions in North and South Carolina. CEF Carolinas provides direct lending to consumers and businesses as well as credit enhancements for other lenders, leveraging private capital alongside public and private investment.
As a nonprofit organization, CEF Carolinas relies on partnerships with public and private investors, foundations and other nonprofit organizations to deploy sustainable financing solutions. CEF Carolinas works closely with philanthropic partners to leverage their dollars in support of clean energy deployment, especially in rural and other underserved areas. Local foundations and family foundations associated with large or growing companies could be a future source of grants as a part of a blended finance solution to meet community needs.
Last month, CEF Carolinas launched its consumer loan program Carolina SURE (Smart Upgrades for Residential Efficiency), a lending program designed specifically to provide an accessible loan product that removes financial barriers for homeowners in North Carolina and South Carolina seeking to electrify their homes and improve energy efficiency. CEF Carolinas is also part of the EnergizeNC Coalition, led by NC Department of Environmental Quality’s State Energy Office, which was awarded a $156 million EPA Solar for All grant to support solar deployment across the state. Unfortunately this grant is paused, in jeopardy and consequently, so is the EnergizeNC mission to provide clean affordable renewable energy to NC communities in the most need.
There are several other examples of nonprofit green banks that iterate on these models, spurring more catalytic capital for clean energy and resilience:
One pioneer to acknowledge is the Coalition for Green Capital (CGC),founded in 2009, which originally sought to establish a national green bank, but pivoted to supporting state and local green banks when federal efforts stalled. Over the past decade, CGC has supported or created over 40 green banks across the country, proving the effectiveness of public-private partnerships in clean energy development through their American Green Bank Consortium, which has collectively deployed $25.4 billion in clean energy investments. In 2024, CGC’s original vision came closer to actualization when they received $5 billion from the EPA’s Greenhouse Gas Reduction Fund to establish the first U.S. national green bank. Unfortunately, those funds are currently paused in 2025 by the current administration.
When properly capitalized, Green Banks of varying models are proving to be a positive market mechanism to unlock and leverage private capital for equitable climate action.
Next in this series: approaches to implementing affordable mitigation and resilience projects with public private partnerships.