How Do CDFIs Impact the Environment?


A Community Development Financial Institution (CDFI) is a lender specifically for small business owners, nonprofit organizations, and other members of minority groups. It aims to help struggling entrepreneurs succeed by providing them with loans. Typically, these institutions operate on a smaller and more local scale as compared to traditional banks. By doing this, they are able to better cater to the specific needs of each borrower.

Additionally, these lending institutions create positive impacts on the environment. You may be wondering how. They make these changes through their investors and their other approaches to environmental development. Read on to learn how partnering with a CDFI can be advantageous when it comes to moving towards a greener world.

Accessible Solar Loans

CDFIs support businesses with green agendas. One of their ways of doing this is by making solar loans more accessible. This is done through the development of a simple and straightforward solar loan product. It is described as such because solar equipment is the only required collateral that is needed to reduce repayment risk.

This makes this kind of loan more flexible compared to a standard one. The reduced collateral requirement gives you more freedom in the sense that you’re not required to pledge property or other business assets as collateral.

Measurable Business Lending Portfolio

CDFIs also partner with other lending institutions to bring about the Partnership for Accounting Financials (PCAF). It is a global industry financed by loans and investments that aims to disclose and provide a measurement of greenhouse gas emissions.

Ever since the formation of PCAF, other financial institutions have come together to partake in measuring greenhouse gas emissions and investment portfolios. As a collective, these institutions aim to align in one mission to reach net-zero emissions in the next 30 years.

Provides Climate Finance

Climate finance refers to funding from public and private institutions, specifically used to finance projects or activities that combat climate change. Combating emissions and greenhouse gasses requires a large investment, and that’s where CDFIs come in.

These lending institutions can help individuals and organizations by funding their projects that would help the environment. Specifically, these are the ones that are driven toward energy efficiency, renewable sources of energy, and infrastructure development.

For example, there are CDFIs that fund solar panels that produce over 8 million kilowatt hours of electricity each year. With this amount of energy, it can provide enough electricity to power an estimate of over 1,000 houses.

Another example would be CDFIs that fund programs that drive climate solutions through decarbonization. There are different climate injustices that we experience that can be resolved through a reduction of fossil fuels. Some examples would include the inhabitable lands brought upon by permafrost thawing and the increase in wildfires.

Re-Builds After Environmental Disasters

Natural calamities can destroy homes, infrastructure, and even whole communities altogether. Rebuilding after these disasters can be difficult, especially if the victims do not have the funds or if they possess low credit standings. These disadvantaged individuals would not be able to take on loans that would help them get back on their feet. Most financial institutions would not even let them apply.

However, CDFIs have the tools and resources to provide disadvantaged communities with flexible loans, paving the way to an easier rebuilding after a disaster. CDFIs are in a position to allow unconventional collaterals for different loans, and these institutions also provide education and training to further assist those in need after an environmental calamity.

Start Green Investing Today

If you’re interested in creating an environmental impact as well, you can start by green investing with a CDFI. This is a type of socially-responsible investment that supports and delivers eco-friendly products and practices. By collaborating with a lending institution with the same goals and vision as yours, you will have an easier time when it comes to attaining and maintaining your financial and sustainable goals.

In addition, you will not only be helping yourself financially. But, you will also be minimizing carbon emissions, waste, and other types of pollution. You will also be protecting our natural resources and advocating for environmentally-conscious corporate practices. Get in touch with a CDFI and start green investing with them today!

Lisa Scholfield
Lisa Scholfield

Lisa Scholfield is a Talker, writer, Journalist and news reporter at Republik City News. My background has been in journalism my entire life, writing community news, investigative series, features, reviews and columns. I believe everyday people should pick up the tools of journalism and inform their communities about the news they need to know.