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OVERVIEW: THE TIME IS NOW

RMI findings indicate that America’s 120 million buildings account for over 40% of national energy use – 38% energy costs savings would require ~$500 billion of investment.
Based on a recent McKinsey study, reducing America's GHG emissions by 45% by 2030 would need annual investments of ~$650 billion.
While the August 2022 Inflation Reduction Act provides considerable financial incentives and other grants to accelerate the climate transition, it is nowhere near sufficient
But it creates a unique moment of opportunity to unlock access to the private capital that funds all other major infrastructure and building development to achieve scaled funding
Our proposed pilot – a secondary market platform – is the first step to achieving that scale

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THE CHALLENGE

Low to moderate income borrowers need below market and reasonably priced financing (and technical support) to participate in the climate transition, or they will be left behind

By addressing these capital challenges, we aim to make clean energy financing more accessible and prevalent within low to moderate income communities.

Community-focused lenders also require support to develop clean energy products for their customers

Lending institutions require a low-cost scalable capital source to expand clean energy lending to low to moderate income borrowers

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THE THESIS

The Secondary Market Platform (Fund) addresses the goals of the lenders and private capital investors, while also supporting low-income communities and leveraging federal policy.

Lenders

Low income borrowers

Secondary Market Platform

Investors

Standardized products make it easier to start or expand clean energy lending
Access to long term capital supports increased lending to low-income communities

Performance data on clean energy loans will help to reduce perceived risk, lowering costs
Standardization of clean energy loans offers more efficient ways to buy, sell and resell loans

Cost savings can be passed to consumers, reducing cost of financing
Standardization will increase the number of lenders, increasing access and competition

Aligned with Federal policy and funding: the Inflation Reduction Act helps create a unique moment of opportunity with increased incentives for clean energy and energy efficiency as well as $27 billion for the Greenhouse Gas Reduction Fund

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INCLUSIVE COMMUNITY ENERGY PLATFORM

Meeting A Market Need

Clean energy lending institutions require a scalable capital source to expand lending.

Community-focused lenders require support to develop and scale clean energy products for their constituencies.

Creating a Fund

By offering to purchase a unified set of products from clean energy and community-focused lenders, a new Fund will act as a warehouse facility and a steppingstone to scale.

This can bring more capital and standardization of products that will widen the pool of potential originators.

Accessing Capital at Scale

Once the Fund has built a portfolio and its model has been tested and proven, the collateral in the warehouse facility can serve as the basis for a capital markets issuance, thereby paving the road to additional capital at scale.

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Discussions with potential financial investors and originators/lenders have been positive

Financial entities are interested in moving forward
Meetings with Amalgamated Bank, Calvert Impact Capital, and Morgan Stanley
All agreed that this is a key effort to scaling clean energy finance and would like to be involved
Discussions identified specific tactical items that would be covered in phase 2:

Given changing economic and interest rate conditions, additional outreach and modeling is needed
Source of long-term capital
20-25% of junior capital or grants required for credit enhancement (anticipated GGRF capital)
Performance data on loans crucial
More product development needed including underwriting standards, standard documents, eligible originator/servicer standards

Outreach and ongoing discussions with more than 30 entities

*Estimate from public information for organizations with specific clean energy programs.

Represents over $555M in �Total Clean Energy Assets^*

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Why is getting secondary market pilot launched now so important?

Launching a secondary market pilot now will be key to long term success of the Greenhouse Gas Reduction Fund (GGRF)

As GGRF funds start to flow, a broad array of lenders start issuing clean energy loans
In the medium term, they will need to sell those loans to free up lending capacity
Having a secondary market set up will enable them to do that when they are ready

The secondary market is the way to transition clean energy finance from a small, niche, customized market to mainstream capital markets

Creating the secondary market pilot platform will be the catalytic phase to transition to that mainstream capital market activity
Standardization of products and underwriting standards will create market standards
All these efforts will reduce the need for credit enhancement over time

This effort will provide a blueprint for other entities to develop their own secondary markets, accelerating their efforts

Two large networks of community lenders (Inclusiv and OFN) would like to work with us to expand their secondary market activity from mortgages to clean energy loans
This would provide a blueprint for scaling secondary market solutions under the GGRF National Climate Investment Fund (NCIF).

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What results would come from funding a secondary market pilot?

Secondary market for solar and single family loans

IPC platform for secondary market for commercial/community solar loans and for single family loans (outside Inclusiv credit union members)
Secondary market platform formally launched and target $20 million in loans warehoused per facility

Design that can be adopted by Inclusiv and other aggregators to leverage these secondary market designs for their own members

Shared product term sheets, which will help guide market toward standardization
Shared best practices in terms of data collection to collect a data set needed to reduce credit enhancement in medium term
Potential for sharing standard contracts
Potential for sharing IT and other platform elements

Integration of platform into national GGRF application anticipated awards, including scale-up funds and expansion into other products (e.g., affordable multifamily housing loans)

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Wrap Up Comments And Discussion

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Who We Are

We provide a gateway to inclusive prosperity by engaging with communities impacted most by climate change. We invest in clean energy and resilience in partnership with local initiatives and organizations to provide energy security, climate justice, and economic growth.

What We Do

ABOUT US

Inclusive Prosperity Capital is a clean energy financing platform spun out of the Connecticut Green Bank focused on aligning investment capital and financing programs with organizations, projects, and community initiatives that benefit traditionally underserved markets.

We have delivered ~$55M in investment across the U.S. and Territories since our inception and currently have a combined total pipeline of over $100M. Approximately 50% of our investments are directly into low to moderate income communities and 60% into communities of color.

Our Impact

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Built for National Scale

Platform Infrastructure: structured finance, transaction management, underwriting, legal, insurance, accounting, treasury, tax, IT/tech platforms, compliance, operations, asset management set up to handle multiple products, jurisdictions and investors

~26 full-time employees
“Intangible asset” representing $2M of corporate investment
40+ corporate entities, mix of not-for-profit and for-profit subs
~$80M raised, 13 separate investors, $multi-million operating budget

Standardized, Scaled Operations: leadership with deep expertise in tech-enabled, productized businesses that experience rapid scale

Customized technology platforms for application, origination and reporting – significant ongoing investment
Culture of continuous improvement, process focus, streamlining

ORGANIZATIONAL CAPACITY

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NRDC is an international environmental nonprofit devoted to protecting the world’s natural resources, public health, and environment. Over the last 10 years, NRDC has been working nationally to scale clean energy investment in disadvantaged communities by collaborating with green banks, CDFIs, and other financial entities.

NRDC’s Green Finance Center was instrumental in creating the NY Green Bank and has worked on several Green Bank campaigns and feasibility studies over the past decade. In 2015, NRDC co-founded the global Green Bank Network and currently serves as its secretariat, along with CGC.
NRDC has also entered into pioneering collaborations with CDFIs and other community lenders, including the Strong, Prosperous and Resilient Communities Challenge (SPARCC) project (with national CDFIs, Enterprise and LIFF) and created the Sustainability in Affordable Housing Lender Learning Network as part of our Energy Efficiency for All project.

ABOUT US

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Current funding status for Phase 2

1.5 Degrees can help unluck additional funds to help fill funding needs of Phase 2a

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OVERVIEW: THE TIME IS NOW

Phase 1 Project helped us identify major gap in scaling LMI clean energy finance: need for secondary market platform(s)

Discussions with interested originators and investors
Identified product types ready for standardization and scaling

Passage of IRA and anticipation of GGRF has further driven market activity and need for secondary market platform

Clean energy lenders are ready to scale and now starting to seek opportunities for more liquidity

Huge ramp up in clean energy deployment
Major focus on LMI investment
Coordination with different national entities means our pilot becomes critical part of national infrastructure

Secondary market platform needed to support that market growth
Economic and interest rate changes make launch more urgent – originators need to know what investors will buy

Greenhouse Gas Reduction Fund (GGRF) Applications

Solar For All – IPC staff spent considerable time preparing the Community Power Coalition application as lead applicant for a community solar program targeting mission-aligned developers and fielding a number of a letter of support requests for state entity applications. In October 2023, IPC submitted the $400 million application to develop 250 MW of community solar projects across 42 states plus Washington D.C. and Puerto Rico. The application included nearly 70 letters of support. The Community Power Coalition's Powering America Together program is projected to reduce carbon emissions by 297,966 tons annually and 7,449,409 tons across the projects’ lifetime, generate at least 20% energy cost savings for 62,500 households in low-income and disadvantaged communities, and promote quality jobs, community wealth-building, community energy resilience, and equitable workforce development.
National Clean Investment Fund (NCIF) & Clean Communities Investment Fund (CCIA) – IPC is a leading partner organization with the Justice Climate Fund’s (JCF) coalition application for both the NCIF and the CCIA, which will make combined awards up to $20B in 2024 to a handful of awardees. The applications included 28 coalition members and received over 1,000 letters of support. Staff worked to support the application by providing feedback to JCF on narratives and strategy, as well as soliciting letters of support. IPC provided letters of support to CCIA applications for OFN and Inclusiv.

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THE CHALLENGE

Clean energy lending institutions require a scalable capital strategy to fill existing gaps in their lending channels, especially for low to moderate income and disadvantaged communities.

This capital challenge affects:

Community Dvelopment Financial Institutions

Green Banks

Commercial Banks

Low to Moderate Income Borrowers

By addressing these capital challenges, our organizations aim to make clean energy financing more accessible and prevalent within LMI communities.

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THE SOLUTION

	Goals	Solutions
Capital	Invest in an LMI + clean energy nexus	Avenue to deploy $ at scale Understandable credit risk Credit enhancement for “new” asset class
Intermediaries	Expanded access to lower cost capital Standardized products Easy on-ramp to clean energy lending	Agreement on product terms & documents Road map on how to underwrite products / shareable standard documents More lower cost capital
LMI Communities	Expand clean energy investment that benefits LMI communities and households	Intermediaries with community connections able to offer fully amortizing, long-term loans with lower rates

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THE THESIS

The Fund aims to meet the goals of Originators, while also supporting LMI communities and leveraging new federal policy.

For the Originators:

Fund creates a readily accessible source of capital at flexible terms

Standardized products create a coherent, replicable strategy for capital markets investors

For Originators looking to enter the market or add a new product, standardization creates a simple on-ramp

For the End Borrowers:

Originators are able to pass on any cost savings from the Fund’s capital to end borrowers in LMI communities

Standardization may promote a wider universe of potential originators able to serve LMI markets

Enabling longer-term, self-amortizing debt (15-20+ years) fills a vast market need

Alignment with Federal Policy:

The Inflation Reduction Act includes:

a) $27 billion for the Greenhouse Gas Reduction Fund, which would provide funding for clean energy intermediaries

b) Strengthened incentives for solar and efficiency, with additional incentives for solar in LMI communities and on federally assisted housing.

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This work serves as foundation for other clean energy finance scaling efforts

Phase 2 Secondary market platform pilot launch

Assessed needs for scaling
Identified secondary market as key need and validated fund structure
Identified products that are a good fit to pilot and scoped out term sheets

Operating platform is vanguard of GGRF secondary markets approach:

$27B not sufficient – need private sector capital markets
Viable secondary market design and platform opens access to that
Standardized terms that can help drive market transformation in long term

Phase 1: Scaling Clean Energy Finance Project

Was basis for Green Bank “big tent” efforts on this topic:

Our work served as blueprint for secondary market effort, IPC CEO co-chaired workgroup
IPC CEO co-chaired product workgroup and socialized our product terms

Fed into NRDC EPA efforts:

EPA advocacy
EFAB input
GGRF application prep

IRA Passed

GGRF Award and Launch - TBD

GGRF Applications

August 2022

Q4 2024

Q2-Q4 2023

Q4 2023

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