Sustainable Finance Opportunities: A Guide for Financial Institutions

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The global transition to a low-carbon economy will provide banks with an enormous commercial opportunity, as borrowers seek new financing for sustainability and climate solutions. In 2022, for the first time ever, companies raised more money in the debt markets for climate-friendly projects than fossil fuel projects, with banks earning estimated $3.3 billion in fees on $580 billion of green financings, exceeding the $2.5 billion of fees generated from raising debt for fossil fuel companies. And that was before the Inflation Reduction Act, with its combination of tax credits designed to spur consumer demand and corporate investment in clean technologies, had begun to have an impact. Around $350 billion in new capital investments in clean energy have been announced since the law passed in August 2022--and some estimates suggest the law will unleash as much as $11 trillion of investments by 2050.

The goal of this guide is to help U.S. banks, credit unions, and minority depository institutions position themselves to take full advantage of this unprecedented commercial opportunity. Using the framework of an opportunity ladder, this report lays out specific examples of innovative financial products and services, as well as a description of the infrastructure and internal resources financial institutions will need to unlock them. Regardless of where banks are on the opportunity ladder, this guide is designed to help them engage existing borrowers, onboard new clients, and drive revenue growth.

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