Long reads

Inclusiv: financially underserved most impacted, yet climate mitigation programmes achieve success

Scott Hamilton

Scott Hamilton

Contributing Editor, Finextra Research

Credit Union intermediary says members hit hard by climate change have developed innovative solutions, warranting them prime seats at policy and funding table.

In the second part of our feature on Community Deposit Financial Institution (CDFI) and financial inclusion empowerment advocate Inclusiv, Finextra examines the New York City-based organization’s statements and programs related to the issues of climate change and resilience.

During our interview with Megan Bolado, director of financial empowerment for Inclusiv, we asked how the credit union innovator and connector and its members were focusing on sustainability, alternative energy, and similar initiatives and products – given that, according to experts,  climate change issues tend to impact persons of colour and those living with lower income much more negatively in the US and across the globe? It’s a clear area of emphasis, answered Bolado, noting that one of the major trends the nonprofit and its members and partners expected to “blow up” (grow substantially) in the near and mid-term future is green lending.

In fact, Inclusiv’s work with its credit union members in this sector, especially in certain geographic zones, has already been generating strong results. Hoping to increase target-community momentum for emerging power alternatives, in late 2020, the organisation’s “Center for Resiliency and Clean Energy” began offering community-based lending institutions (credit unions, CDFIs, and community banks) a virtual solar lending training and certificate programme, in cooperation with the University of New Hampshire and US Department of Energy Solar Energy Technologies Office.

“Our solar lending programme supporting entities that are trying to provide loans around that technology…and weatherisation of homes and businesses…is growing at a phenomenal rate.” Further, Bolado stated, the organisation has even investigated partnerships in some regions that would help its member credit unions provide financing for lower income people to purchase electronic vehicles (EVs) in lieu of traditional gas or diesel-powered automobiles. And when it came time in 2022 and 2023 for the federal government to weigh businesses’ opinions on where the Inflation Reduction Act’s $27 billion in Greenhouse Gas Reduction Funds should be spent, Inclusiv weighed in strongly on behalf of its credit union members’ rights to a significant portion of that funding.

In comments to government regulators, Inclusiv representatives emphasised historical mistreatment and huge future challenges posing a disproportionate risk of climate change-related damage to low-income households and communities. But they also pointed to the fact that minorities and low-income individuals have consistently invested the largest amount of dollars in their own communities of any group, asserting they clearly deserve a seat at the table when climate-related programme money is allocated.

Indeed, Inclusiv is not shirking from the now-ongoing IRA funding fight despite strong competition from commercial and other entities. They are key players in debates on the topic of climate-related financial risk, having formally responded in late June to a request for information (RFI) from the National Credit Union Administration (regulator for the industry) with extensive recommendations for NCUA on how it can help CUs to prepare for, respond to, and recover from climate change, including encouraging credit union member training and support for ‘green lending’ programs in local communities. That same week, CEO Cathie Mahon testified for credit unions on the topic before the US Senate Climate Change Task Force. She addressed the opportunities Inclusiv and its members see from the Greenhouse Gas Reduction Fund (GGRF), a key component of the Inflation Reduction Act that will provide $27 billion in funding for clean energy projects and energy efficiency upgrades with a focus on “low-income and disadvantaged” communities. Mahon pointed out to the Senate panel that Inclusiv’s member institutions “serve those located on the frontlines of climate change, specifically communities with the poorest air quality, highest energy burden and most vulnerability to climate events such as hurricanes, floods, drought, wildfires, and tornadoes.”

Mahon offered facts and examples to bolster the organisation’s case for Inclusiv’s member CDFIs as a “natural fit” for the GGRF’s “focus on climate and equity”. She asserted that credit unions and their members should be included at the top of the list of Department of Energy funding awardees. Highlighting several recent, and successful, credit union renewable energy projects offering local programmes in clean energy and efficiency upgrades, Mahon shared Inclusiv’s view that “the Greenhouse Gas Reduction Fund is not simply a new source of capital or an opportunity to launch new loan products.  We see the Fund as the opportunity to create more equitable environmental, energy, and financial policy in this country.”  

Not just a hand-up, but building lasting bridges to economic success

Beyond their advocacy related to specific challenges like climate change and historical exclusion from mainstream financial opportunities, we asked Inclusiv’s Bolado about the financial risks involved in promoting alternative lending options, and the forces driving the intermediary/industry champion and its member credit unions to continue expanding their offerings and efforts to communities and businesses on America’s financial fringe.

“What's really interesting about community development and credit unions is that yes, they're very mission driven.” And she noted also that credit union charters demand the institutions maintain strict financial solvency and lend prudently just like banks. In fact, Bolado pointed out, “one nice thing I will say about the credit union movement and the CDFIs and the MDIs that we work with, is typically they see a lot lower rates of default. So even though there's more risks that they're taking on, typically their rates of default are so much lower because of the difference in the way that the services are delivered. Credit unions … they're not just a transaction. When they're nonprofit, it's a whole new way you're providing that service. The teller is your financial coach. Your branch services people are saying ‘hey, we've known you for years.”

And that means, Inclusiv’s Bolado says, that when it comes to weighing the relative risks of a particular member’s loan approval, for example, credit union staff will often handle the situation differently than if the lending institution’s profit and risk were the sole decision considerations. Instead, they might offer innovative yet mutually acceptable alternatives, something that would not be uncommon in the innovative nonprofit powerhouse’s universe of community development credit union members – hard-working individuals who’ve laboured for years, possibly fallen short of standard lending criteria, and often heard nothing but rejections throughout their financial lives. Such as this alternative answer, and offer of hope for the future: “We see that you're applying for this particular product, but we actually think first, it’s not a ‘no - you're denied’. It's a ‘not right now, but how about this instead?’”

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