US history shows that when the country faces major economic challenges, America creates public institutions up to the task of meeting them. An example is the Reconstruction Finance Corporation that under President Roosevelt played such a key and large role in funding investment in the 1930’s New Deal (Uğurlu and Epstein, 2021). This policy brief explores key insights for policy makers on the role of a federal green bank to address the urgent need to mobilize finance to address the threat of climate change.
Theory and practice both point to compelling evidence that a federal green bank would channel public and private investment for the public interest, particularly climate mitigation and resilience (Bhandary et al., 2021). In the future, this bank could be broadened to an American Investment Bank (see Hockett and Omarova, 2017, for a proposal). The bank would be a lead or supplemental investor in critical green infrastructure projects across the economy with a particular mission of stimulating investment in projects that reduce emissions or help communities adapt to climate change. A federal financial institution can be used specifically to stimulate profitable projects that many private institutions may not at first find attractive, steer investments into underserved communities, and catalyze economic development in towns, cities, states, and regions across the United States (many of which are ignored by Wall Street). A federal green bank can be one of the best tools in the country’s toolbox for ensuring a just energy transition that supports communities being left behind with targeted investment.
