Minnesota leaders plan to launch the state’s first-ever “green bank” this year to invest in climate-friendly projects, and could start distributing some of its $45 million funds early this summer.
Peter Wyckoff, an assistant commissioner in the energy division of the Minnesota Department of Commerce, said that $45 million state investment puts the green bank in a stronger position than most similar institutions launched by other states, and allows Minnesota to talk to them as an equal.
Green banks differ from traditional banks in that they’re not mainly concerned with profitability. The banks are established using public funding, and seek to leverage those dollars to generate more private investment. They then attempt to speed the transition to a clean energy future by funding projects that lower emissions or produce carbon-free power.
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Minnesota lawmakers passed legislation last May establishing the green bank. Governor Tim Walz signed bills establishing the bank, also known as the Minnesota Climate Innovation Finance Authority, shortly thereafter, equipping the bank with its initial funding. The bank is aiming to secure additional funding available from the federal government this year.
A range of advocates have heralded the bank’s arrival, which they say should provide financing for clean energy projects that have not been adequately funded through other avenues.
Walz appointed the bank’s board of directors last October, which met for the first time in November to appoint co-chairs. The board members were drawn from fields, including labor, housing, and commerce, according to state officials.
The state Department of Commerce, which is hosting the bank until it becomes an independent entity, tapped Pete Klein to lead it until a permanent director can be appointed. Klein, who formerly served as vice president for finance at the St. Paul Port Authority, started in January.
“Leading an agency that will have a positive effect on every Minnesotan is simply an opportunity that I could not walk away from,” Klein wrote. “Not many individuals can say that they lead a state agency, and far fewer can say that they were there at the beginning.”
A number of other states, including Connecticut, New York, and Hawaii, all have similar green bank initiatives, with a number of additional states introducing or passing green bank legislation within the last two years.
Wyckoff said that’s been an asset for people working on Minnesota’s green bank, who have been meeting with green bank leaders from other states.
The green bank will have the ability to enter into financial agreements with federal and state agencies, local governments, corporations, and individuals at a funding level of $250,000 or higher. It will not directly fund individual homeowners, nor will it serve as a conventional bank where people could open checking and savings accounts.
“What the green bank can do is bundle up all the smaller projects that might not be super attractive to businesses, but allow the green bank to kind of serve as a financial launching pad that will make those smaller but very impactful projects in the collective more attractive,” said state Senator Tou Xiong, one of the architects of the green bank legislation. “That’s really my goal.”
Xiong said an example of a project the green bank might be particularly well-placed to fund is a business focused on weatherizing Minnesota homes.
“I think it’s going to take, like, 300 years at the pace we’re going with funding to weatherize all the housing stock in Minnesota,” Xiong said of how those efforts are going without the aid of the green bank. “That’s one type of project I’ve had in mind.”
Wyckoff also mentioned weatherization and electrification projects as prime candidates for green bank assistance, as well as other projects that could help lower-income homeowners make their homes safer and more energy efficient — projects that the state has a vested interest in, even if private banks might not.
“These are not places that a lot of banks look towards first to do their investments,” Wyckoff said of conventional banks. “This bank should and will focus on projects that would not go ahead in a world where this green bank didn’t exist.”
Xiong said the plan is that the bank will not ask for any more money from the state Legislature beyond the $45 million it has already been allocated, and instead will pursue federal funding and private investments to become self-sustaining.
This year is set to be a pivotal one: the bank is expected to be operational by the middle of 2024, around the time it will be applying for federal funding available to green bank projects from the Environmental Protection Agency.
Establishing the green bank last year was a pivotal step in positioning the state to receive federal dollars made available under the Inflation Reduction Act. Minnesota’s green bank leaders are looking for ways to make the bank more attractive in the competition for federal money.
“Part of it for me was trying to attract new businesses, but also trying to bring those benefits to historically underserved communities, because that was part of the federal guidelines,” Xiong said.
One of the ways the bank aims to increase the likelihood of receiving federal funds is to work with BIPOC-owned firms that work on climate-friendly projects. It will aim to make sure more than 40 percent of the benefits go to disadvantaged and environmental justice communities, Klein wrote.
If all goes according to plan, state officials expect that the bank will expand quickly in the coming months. Wyckoff said the bank is being launched at a “moment of a lot of possibilities,” and that the Commerce Department is trying to make sure it can hit the ground running.
Klein said he expects the bank’s board to identify a permanent executive director by summer.
“Helping the state meet our carbon reduction goals is a tremendous challenge,” Klein wrote.
For more information about the green bank, visit its website here.
CORRECTION: A previous version of this article misspelled Senator Tou Xiong’s first name.
