Talk about good timing. Just weeks after Congress passed a massive economic stimulus bill that included more than $40 billion of green initiatives, organizers of the environmentally focused e3bank were given a stamp of approval in April by the Pennsylvania Department of Banking.
When the bank opens its doors in July or August (depending on when it finishes raising $30 million in capital), the Malvern-based bank hopes to be among the first in line to help finance renewable energy power generation and transmission projects in its area. The bill also gives tax breaks for homeowners and businesses that retro-fit properties to make them more energy efficient, and the bank intends to capitalize on demand for financing of such projects, said e3bank's chief executive, Frank Baldassarre Jr.
"Our business model worked a year ago when we formulated it without any stimulus, and these initiatives only enhance our value in the marketplace," he says.
Included in the $787 billion stimulus package President Obama signed in February were various green-backing initiatives: $11 billion for research and development for the Smart Grid Investment Program, $6.3 billion for local government energy efficiency grants, $6 billion for renewable energy loan guarantees and $5 billion for home weatherization projects. These investments, the president said, would double the amount of renewable energy produced over the next three years.
Bankers say that with many of their customers eager to take advantage of tax breaks and other incentives, the flood of money flowing toward green initiatives could create a range of new lending opportunities. Homeowners will be looking for home-equity loans to purchase and install replacement windows. Commercial property owners will need loans to retro-fit office or industrial buildings to make them more energy efficient. And energy firms will need loans to build or expand wind farms or other renewable energy projects.
Jean Pogge, executive vice president of consumer and community banking at ShoreBank in Chicago, says she is "thrilled that President Obama has put this much emphasis on conservation."
ShoreBank already is one of the nation's most green-focused banking companies. For years it has been encouraging developers to think green by installing more energy-efficient appliances, windows, and heating systems that may cost more up front but will save owners money in the long run. Last year, it made $183 million in conservation loans, Pogge said.
"This year we are hoping there will be some stimulus money to make energy conservation part of every single mortgage we do," she says.
The bank also sees opportunity in financing energy-saving improvements in commercial properties. The average retrofit for a typical building — not those massive towers — can range between $100,000 to $3 million, Pogge says. "That's a very good place for banks to be making loans."
Umpqua Holdings Corp, in Portland, Ore., recently launched an eco-banking division with the intention of helping companies and individuals fund sustainable projects. The unit grew out of its GreenStreet Lending Program, which offers loans of up to $100,000 for businesses and $50,000 for homeowners that use the funds for energy-saving improvements.
Dan Weldon, who heads Umpqua's eco-unit, says that the new division was in the works before the stimulus package was approved. Nevertheless, he expects the incentives in the bill will create more interest among businesses and consumers to cut energy costs, which could generate more loan business for Umpqua.
Moreover, the stimulus bill appears to be encouraging other banks to think green. Umpqua has teamed up with a state agency, Energy Trust of Oregon, to identify opportunities in financing sustainable projects, and since the stimulus was passed, Weldon says he has heard from a number of bankers in other states seeking advice on how they, too, could work with similar agencies in their markets.
"I believe you are going to see green-banking endeavors grow quite rapidly," Weldon says.