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News August 16, 2022

The Climate Crisis’ Inequitable Impact on Communities of Color

Topic CDFIs
Geography Georgia

The climate crisis is one of our most pressing issues when it comes to envisioning a vibrant future full of opportunity for future generations.

We observe the effects every single day: from drying lakes, droughts and wildfires, to flooding coastal areas, severe storms, extreme heat, and an increase in human infections. But the risks and costs of climate change are not equally shared. Research shows that low-income people and communities of color disproportionately live in places with poor environmental quality and the resulting adverse health effects.

This is because in most cities, the high cost of housing, coupled with historic segregation and redlining have led to concentrations of people living around industrial sites, transit infrastructure and other polluters that are contaminating the air and compromising the atmosphere through carbon emissions and other toxins.

A study published last year in the journal Nature Communications found that in urban areas people of color tend to live in census tracts with hotter summer temperatures than white non-Hispanic people, with Black residents specifically experiencing the greatest differential.

Similar patterns were evident for households living below the poverty line relative to those above it.

Community Development Financial Institutions (CDFI) are 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 a CDFI, Reinvestment Fund is a pioneer in clean energy investments that intersect with community development. Since 1993, we have invested $103 million in clean energy solutions like 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 forged 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. While seemingly race-neutral, credit scores are known to have embedded systemic issues as they are based on algorithms that often disadvantage people of color.

With these two innovations, the firm has reimagined solar as no longer a luxury that is only accessible to wealthy homeowners. As of last year, PosiGen has installed over 20,000 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 and operates in seven states.

Closer to home in Atlanta, the Southface Institute works to promote sustainable homes, workplaces and communities through education, research, advocacy and technical assistance. Southface collaborates with a network of partner nonprofits, businesses, government agencies, universities, and technical experts to implement sustainable, high-performance and scalable solutions.

A commitment to equity is core to the company’s mission, working to ensure that sustainable communities and healthy and efficient building practices are not just for those with access to wealth and privilege, but accessible for all under-represented communities. Southface’s work included clean and equitable energy, sustainable development, and helping to build healthy, affordable and resilient communities.

Also working to create more equitable energy policy and co-create clean energy solutions that benefit everyone is the Atlanta-based  Partnership for Southern Equity (PSE). The mission of the PSE is to advance policies and institutional actions that promote racial equity and shared prosperity for all in the metropolitan Atlanta area as well as the southern U.S.

PSE’s Just Energy initiative represents an equity ecosystem of frontline communities, subject-matter experts, houses of worship, youth movements, and academia organizing together to engage marginalized communities and communities of color about the sourcing and commodification of power generation in Georgia.

Although the best way to slow climate change is to reduce greenhouse emissions by switching to clean energy sources like solar, wind, water, and nuclear energy, the CO2 already in the atmosphere can persist and continue to exert warming effects for centuries. By reducing energy waste and promoting the use of renewable energy, such as wind and solar, we must collectively invest in ways to reduce the adverse health and environmental effects that result from conventional, carbon-intensive energy sources.

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.

To learn more about Reinvestment Fund’s clean energy work, visit here.

Originally published in the Saporta Report, August 15, 2022


For More Information Contact:

Reema Fakih
Managing Director, National Lending

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