CDFIs Lead the Charge on Solar and Energy-Efficiency Financing  

CDFIs nationwide are financing projects that save energy and money and generate environmental benefits for low-income communities adapting to a changing climate. 

Read time: 5 minutes

Energy efficiency is key to sustainable infrastructure. The benefits of energy efficiency, whether in the form of solar, appliances, or home cooling, are much more than environmental — there are major economic upsides as well.  

As financial first responders, CDFIs bring critical capital to markets that traditional financing doesn’t reach. We saw it during the 2008 recession, COVID-19 pandemic, and countless natural disasters that disproportionately impacted low-income, low-wealth communities – the same communities hardest hit by climate change. 

To help these communities become more resilient to extreme weather events — while also putting more money in their pockets — CDFIs, including many in OFN’s network, are financing energy efficiency upgrades to homes, small businesses, and community facilities.  

Below, we highlight a few CDFI-funded solar energy projects and retrofits. All of the projects featured are recipients of OFN’s renewable and energy efficiency financing grant program. Through this four-year program, OFN provided more than $5 million in grants to members focused on renewable and energy efficiency.  

Solar Energy 

Residents increasingly seek solar power to lower their carbon footprint and reduce energy costs. But solar installation and technology come with high price tags, and the households and businesses that could most benefit from lower energy costs struggle to make efficiency upgrades, even with tax and other public incentives. At the same time, the cost of solar installation can still be too low for many financial institutions to finance, including green banks. 

Enter CDFIs, which finance solar installations in both residential and commercial buildings: 

• Rhode Island-based Capital Good Fund has offered loans for energy-efficiency home upgrades since 2011, and recently expanded into solar. In 2023, they financed a $38,000 loan for a residential client to purchase and install solar panels. In addition to the cost savings, tax, credits, and environmental benefits, the client will substantially improve her credit score as she pays off the loan and builds wealth for herself and her children. “As a mother, I want to protect my children’s future, financially and environmentally.” 
   
• In Monticello, Kentucky, financing from Kentucky Highlands Investment Corporation is powering a nearly 15,000 square-foot medical facility that brings critical health services to a rural community in coal country. Last year the facility lost vaccines and other refrigerated medicines during a local power failure. A solar energy system with a battery backup will ensure the continuation of services, even in the event of extreme weather and power outages, and Kentucky Highlands came in with affordable financing to make the cost of reliable solar energy — and its accompanying savings — within reach. 

Home and Building Retrofits 

Retrofitting, the process of updating an older appliance or system, is critical to keep families in place. Older homes and buildings have poor insulation and energy efficiency, which makes the spaces drafty, under- and over-heated, and expensive to maintain.  

CDFIs are prioritizing retrofitting as a solution to maintain existing buildings, lessen the environmental impact of demolition and rebuilding, and empower people to live and work where they choose.  

• Washington, D.C., has the highest level of racial economic disparities nationally. Across the city’s culturally rich neighborhoods are older buildings and homes that tout beautiful charm but contribute significantly to greenhouse gas emissions. Seeing this persistent issue in Washington and Baltimore, City First Enterprises launched its green lending initiative in 2020 to decarbonize communities while promoting resilience and racial and economic equity. The CDFI partnered with DC Green Bank to finance a project to acquire and renovate a four-unit multifamily building built in the late 1930s.
  
  Combining the tenets of affordable and sustainable housing, the project will use passive building principles to lower energy consumption for heating and cooling, compared with its conventional counterpart. Once completed, the four units will be leased to very low-income households.

• Another example is Craft3, a CDFI that envisions and works towards a Pacific Northwest that is thriving, just, and empowered. Craft3 finances affordable loans of up to $10,000 to allow homeowners to enjoy the health, comfort, cost-savings, and environmental benefits of energy-efficient upgrades that are not often accessible to low-income households or BIPOC borrowers.
  
  These smaller loans, which many traditional financial institutions cannot accommodate, have helped homeowners conserve significant energy, avert greenhouse gases, keep families in place, and increase home values. One Craft3 customer who used a home energy loan to finance a new heat pump and insulation said: “I’m finally not begging my husband to sell our house and move back to Alaska.” 

Get Involved

Whether through solar panels, residential retrofits, or building new energy-efficient, low-income housing, CDFIs and other mission lenders have a deep knowledge of the climate challenges facing their communities and offer flexible and low-cost financing to support clients where they are. Together, our national network of more than 400 mission-driven community lenders is leading the just energy transition in rural, urban, and Native communities. 

Learn more about how OFN members are getting involved in climate lending, and what we are doing to support our network.

Share Your CDFI Green Story 

Is your CDFI a longtime or newbie green lender? Share your client success stories and showcase your work. 

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Tags: Impact Investing