There are pros and cons to each green bank model, however, the biggest advantage that a publicly chartered or quasi-public green bank would have over the non-profit model is its access to public capital. 

In this case, the public capital compensates for the discontinuity between the federal and state government on climate policy. 

Without a standardized approach to incentivize the transition at large and the regulations to keep all market participants accountable, the private sector remains skeptical and views the transition as a threat to their economic interests. 

The initial public capital can signal the government’s long-term commitment to the clean energy transition and as a result, encourage private sector motivations and investments away from oil and gas and toward the green market. 

So even if the legislature fails to consider alternative legislative tools to combat climate change, appropriating a small fund or set amount of resources towards a green bank can increase private sector confidence, reduce risk at a faster rate and accelerate partnerships to encourage the rapid adoption of clean energy technology. This is especially important if the goal is to catalyze investments in underserved or neglected markets. 

Non-profit models can achieve the same level of success, however, the speed at which they can begin their operations depends on the funding infrastructure available. If initial funding can be acquired, whether it’s through public or private grants, rapid and equitable adoption can be accomplished. For example, the Colorado Clean Energy Fund was incorporated as a 501(c)(3) nonprofit in 2018 after a collaboration between a variety of public and private stakeholders and received initial funding from the State of Colorado (Senate Bill 21-230).

However, if a non-profit approach was taken, it could be possible that the market and political conditions were not suitable for a legislative approach. For example, North Carolina’s Green Bank (NCCEF) was established as a non-profit entity in 2018 to help the Cooper Administration reach its climate goals (Executive Order 80), but the conditions to appropriate public capital towards the fund have been unfavorable, so NCCEF is still mobilizing the resources it needs to become operational.

Assuming circumstances are feasible, developing a state-sponsored or quasi-public green bank would be the quickest way to reduce greenhouse gas emissions because of its ability to signal private sector confidence and motivation to expedite their transition; and unlike the non-profit approach, they have access to existing government resources such as staff, dollars, and operational structures to begin working. 

However, there are a few drawbacks; unlike non-profits, public green banks are using public resources to cover overhead and operating costs and can be subjected to political risks. For example, the Connecticut Green Bank (CT Green Bank) was established as a quasi-public agency in 2011 with bipartisan support (Public Act 11-80), however, in 2018 the Connecticut General Assembly passed a two-year budget that removed 50 percent of the funds administered by the CT Green Bank. That decision cut operating expenses, put potential deals on hold, and in turn, shook investors’ confidence. 

Depending on the state, the quasi-model can be less sensitive to political risks and administrative burdens because it can acquire outside capital. If political conditions are unfavorable, stakeholders and policymakers would be encouraged to consider establishing their green bank as a 501-C3 non-profit, however, they must be prepared to formulate a plan that can secure funding.

Unlike Michigan, the conditions in the state of New York were very different. New York has two green banks, the first, is a state-wide, publicly chartered green bank (NY Green Bank) housed within an existing institution (NYSERDA), and later further capitalized

That’s different from Louisiana’s local quasi-public green bank, Finance New Orleans (FNO), which repurposed an existing 1978 institution and established it as the city’s official green bank in 2017. Although the state of Louisiana is far from making a shift away from oil and gas, FNO’s presence can be used as a strategy to help build political support for climate policy throughout the state because it can demonstrate the economic benefits of clean energy investments. 

The best route is created by policy entrepreneurs that use existing public resources to maneuver around state and local political and cultural resistance to the transition. Policymakers and stakeholders should use this as a guide to help them understand what resources they have at their disposal, identify possible administrative burdens and determine whether and if a legislative route is possible.