Green banks are created to accelerate private investment in low carbon, climate-resilient (LCR) infrastructure, particularly clean energy projects. Individual green banks have been reporting their financial performance as well as performance beyond financials, or “impact”, for years. But before now, no resource existed providing details on how those reporting practices compare across institutions and how tracking that impact can help green banks most effectively increase private investment in LCR infrastructure in their own jurisdictions.
To fill this knowledge gap, NRDC, in its role as Secretariat of the Green Bank Network (GBN) along with the Coalition for Green Capital, released a new issue brief on How Green Banks Assess and Report Impacts. The brief describes how GBN members—six green banks in five countries—assess, monitor and report on their direct and indirect impacts.
Executives from two of the green banks highlighted in the brief, Green Investment Group and NY Green Bank, will share their first-hand experiences with impact reporting during a webinar next month. You can register for the webinar here.
Green banks are hybrid institutions—they are initially funded with public dollars but have a narrow mandate to work closely with and influence private sector investors to accelerate investment in LCR infrastructure projects. In this role, green bank activities result in both direct impacts, like renewable energy production and carbon emissions reductions, as well indirect impacts on the broader economy in the form of widespread, enduring market changes.
For the first time, the issue brief compiles information about impact reporting across green banks that highlights to public sector stakeholders (taxpayers, government officials) how green banks seek to demonstrate that money invested in them is achieving carbon reductions and other public policy goals. That’s important because the enormous capital requirements to decarbonize the global economy means that limited public funds must be used as cost effectively as possible.
For private capital providers, the brief outlines how green banks demonstrate that their investments are having both positive financial and non-financial returns. That’s valuable for private investors who are increasingly seeking to demonstrate to their own stakeholders that they understand and are taking advantage of sustainable investment opportunities.
Because green banks’ impact reporting frameworks were created to achieve the reporting goals of each individual green bank within its own policy and market context, practices differ to some extent from bank to bank. Nevertheless, the issue brief highlights key issues that green banks must commonly account for, including data collection, data analysis, impact attribution, performance monitoring, and data verification.
The issue brief also contains a table illustrating which metrics each green bank uses to report impact related to investments and project pipeline, building industry capacity, energy savings and production, environmental benefits, and newer impact areas like employment and public health. Some metrics are unique to an individual green bank, but others reported on by all GBN members are used to report aggregate GBN member impacts.
Green banks are special in that their mission is market transformation, which they seek to achieve and measure. Market transformation refers to the process through which green bank activities increase the scale of private sector investment in LCR infrastructure markets. The market can be broadly defined to include all LCR infrastructure, or it can be more narrowly defined by an institution that focuses on particular market segments.
Transformation implies widespread and permanent change toward a common envisioned future, and for green banks, that future is one in which LCR infrastructure is financed increasingly with private capital as new asset classes are created and enter the investing mainstream. Global market transformation involves the decarbonization of public and private investment with an emphasis on LCR infrastructure, which is low carbon and resilient to the unavoidable consequences of climate change. The specifics of market transformation and its assessment can vary based on the market, technologies, and business models involved.
Green banks are experimenting with different approaches to evaluate their impact—including their contribution to market transformation—and sharing their findings with the public. Their approaches and lessons learned described in How Green Banks Assess and Report Impacts and on the upcoming public webinar can be useful for all stakeholders interested in how public capital can be effectively used to increase private investment in LCR infrastructure.