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Kresge doubles down on support for climate finance ecosystem with new tranche of investments

Environment, Social Investment Practice

The Kresge Foundation announced four new social investments today designed to help solar and energy-storage products reach more Americans through the decarbonization of community facilities.

As billions of federal dollars funnel into communities through the Greenhouse Gas Reduction Fund, ensuring communities with low wealth have projects ready for investment remains a critical need if dollars are to reach those places. To help ensure that happens, Kresge has invested millions in organizations that work to bring technical knowledge and project development capacity to the communities that traditional solar markets ignore.

The new investments, totaling $6.5 million in commitments, include:

  • $1.5 million in a guarantee to Collective Energy to help demonstrate how the new transferability of federal investment tax credits can support community projects
  • $1.5 million in a second guarantee to Collective Energy to support long-term capital needs
  • $1.5 million loan to Cap Solar for predevelopment and construction capital
  • $2 million subordinated debt to Clean Energy Credit Union as quasi-equity

“We will look back on the GGRF as the founding moment of the community development climate-finance sector,” said Joe Evans, who oversaw the investments for Kresge’s Social Investment Practice, in partnership with its Environment Program. “However, the industry must aim its energy, its focus, and its technical assistance dollars on project readiness at the community level to ensure the capital, tax credits, and new systems all land and grow in communities of color and communities with low wealth—communities largely left out of the transition to a cleaner future so far.”

The first two organizations supported—Collective Energy and Cap Solar—are “co-developers” and work with community organizations to plan, develop and finance solar, solar+storage and other decarbonization projects. Co-developers often face significant challenges, including funding and financing gaps that prevent them from scaling services to more community organizations.

The first Collective Energy guarantee represents a field first, helping to introduce into community development the practice of monetizing tax credits via transferability while also demonstrating for investors that they do not need the often-expensive full insurance protection against the risk of tax-credit recapture.

The second guarantee provides credit enhancement to catalyze the debt and equity needed for the organization to build and maintain solar microgrids for community health centers and other community-serving institutions at scale.

“Before the Inflation Reduction Act, the only pathway to solar tax-credit monetization came through complicated and expensive tax-equity partnerships that made using the tool in the community development space challenging,” said Aaron Seybert, Kresge’s managing director of the Social Investment Practice. “Now, with a tax investor who has agreed to purchase the tax credits, our guarantee removes risk from that transaction and provides an important early example for the field around utilizing this new solar investment tax-credit monetization method.”

Collective Energy is a member of the CHARGE Partnership along with the National Association of Community Health Centers and Capital Fund, a community development finance institution. The CHARGE Partnership makes solar+storage systems available to community health centers.

Replication of this partnership is now underway for community action agencies and other large networks of community service providers, both as a direct project development activity but also as a pathway to normalizing the use of renewable energy technologies and creating interest and trust in communities. This strategy is informed by research that shows that the rate of home adoption of solar panels accelerates when non-residential solar installations occur in the same community.

“Community health centers, houses of worship, frontline social service agencies, food banks and other community-serving groups are trusted actors in their neighborhoods,” said Jessica Boehland, senior program officer with Kresge’s Environment Program. “As they come up to speed on the new technologies and resources available for decarbonization, they can share their learnings with the people they serve to powerful effect.”

The investment in Cap Solar will provide financing for the predevelopment and construction of solar and solar+storage systems installed on buildings owned or leased by community action agencies (also called CAP agencies) and their community-serving partners. At least 1,000 community action agencies across the country provide frontline services such as energy assistance, Head Start programs, social services referrals, and workforce development.

Cap Solar, founded by a leading community action agency, has installed 30 microgrids for nonprofits in New Jersey. The National Community Action Partnership is a trade association for community action agencies and together, these two organizations will form the basis of a new partnership, Electric CAP (eCAP). Modeled after the CHARGE Partnership, eCAP will make solar, solar+storage and other decarbonization activity available to community action agencies.

“We see great promise for normalizing decarbonization technology in communities of color and communities with low wealth by supporting CAP agencies to evaluate their buildings and plan and execute projects,” Evans said. “We also are working to foster partnerships that will help CAP agencies share their learnings with the people they serve and refer them to trusted sources for information and financing to reduce carbon use, increase efficiency, and further electrify their own lives.”

Clean Energy Credit Union is a national, online-only credit union with direct-to-consumer climate-finance products for EV chargers, energy efficiency upgrades, heat pumps, solar panels and related products. It takes a network-based approach to sourcing customers and focuses on low-income communities, offering these consumers discounted interest rates that make these projects more accessible. Kresge’s investment is intended to boost its efforts to bring these products to communities where networks like CHARGE and eCAP work.

“The nation can’t afford to miss this opportunity to bring green energy to the communities across America that are most vulnerable to the impacts of climate change, including low-wealth communities and communities of color,” said Lois DeBacker, Kresge’s Environment Program managing director. “These investments represent a continuation of our strategy to bolster the community solar movement. Without strong partnerships and well-resourced co-developers, the federal funds at play will miss the mark. We proudly support these leaders and their organizations ensuring a more just energy transition.”