Economic inequality, racial wealth gaps and the climate crisis are among our generation’s most pressing hurdles when it comes to envisioning a vibrant future full of opportunity. The pandemic has only exacerbated these crises and amplified the need to invest in solutions that address these deep, systemic challenges.
In the United States, Community Development Financial Institutions (CDFI) are a beacon of hope as investors in positive change. CDFIs are federally-certified, private-sector, financial intermediaries with community development as their primary mission. Committed to delivering capital to historically excluded communities, CDFI investments prioritize measurable social returns along with financial returns. As financial institutions and governments step up to meet the Sustainable Development Goals (SDGs) by 2030, CDFIs are a crucial channel for private and public investment capital.
Reinvestment Fund is a CDFI that invests across the United States to ensure that all communities have access to essential opportunities: affordable places to live, access to nutritious food and health care, schools where their children can flourish, and strong, local businesses that support jobs. Unique among its peers, Reinvestment Fund is also a pioneer in climate-conscious investments that intersect with community development.
Since 1993, Reinvestment Fund has partnered with financial institutions and government to channel capital to projects that include clean energy generation through wind and solar, energy efficient design and equipment in new building construction, energy efficiency retrofits of both commercial and residential buildings, transit-oriented development, local food systems, and more.
In 2021 this included an investment in PosiGen, a for-profit residential solar developer and provider of energy efficiency upgrades that works primarily with low- to moderate income households in communities of color.
PosiGen was established in the wake of Hurricane Katrina in New Orleans when founder Tom Neyhart observed that large segments of the city’s population were being ignored by the solar installers whose systems were going up on the roofs of many houses in the city’s wealthier neighborhoods.
The firm pioneered an entirely different approach to assessing the credit risk of underlying customers. They focused on utility bill payment history and potential energy savings instead of credit scores. Traditionally, financing in the US is dependent on credit scores. While seemingly race-neutral on its face, credit scores are known to have embedded systemic issues as they are based on algorithms that often disadvantage people of color. PosiGen has also developed an “out of the box” system design that reduced installation costs compared to the “design to fit” systems more prevalent in the industry.
With these two innovations, the firm has reimagined solar as no longer luxury that is only accessible to wealthy homeowners. To date, PosiGen has installed over 17,000 systems, with over 70% of its customers being low to moderate income households. It has also helped ensure that 100% of customers save money, alleviating some of the financial strain low- and moderate-income households can experience from high energy costs. The company has since expanded from its core Louisiana market into New Jersey and Connecticut.
Even with its success, traditional capital providers have been slow to recognize that PosiGen’s portfolio performs just as strongly as those underwritten on the basis of credit scores. Reinvestment Fund, together with financial institutions Mizzen Capital and Stonehenge Capital, were able to step in to provide a loan that is helping PosiGen continue to grow making solar more accessible. Mizzen Capital led the investment.
In addition to helping energy-burdened families invest in their homes and save money on their utility bills, PosiGen is also committed to creating employment opportunities for the residents it serves by hiring locally and paying family-sustaining wages with health and retirement benefits for employees. Over 70% of employees are hired from the neighborhoods where PosiGen has a concentration of installations. More than 65% of PosiGen’s employees are women or people of color.
Employee Susan Young is a case in point. A homeowner and a single mother with two kids, she wanted to get help reducing high energy costs from her older home. Denied by other solar installers because of her credit score and income, she turned to PosiGen. She was so pleased with her experience that she applied for an entry-level sales position with the company. Tom Neyhard recalls what she said, ‘I’ve never sold anything in my life, but I think if I tell people my story, people will want to buy PosiGen.’ She was right. Today, Ms. Young is PosiGen’s community marketing manager for the state of Connecticut.
Regardless of race, class or income, communities everywhere want to make things better for generations to come. Projects like PosiGen generate multiple impacts – from clean energy and housing affordability to strengthening environmental resilience and fostering economic opportunity through employment.
In a world where the risks and costs of climate change are not equally shared, targeted investments in projects like PosiGen help reduce economic and social disparities as well as improve climate resilience. Working together, financial institutions, government and CDFIs can rise to that challenge.
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