Rooting Green Lending in Restorative Justice: A Conversation with LISC & Pacific Community Ventures

12.11.2024 - LISC Stories

In a conversation with LISC Small Business Vice President Steve Hall, the team at Pacific Community Ventures (PCV), a nonprofit impact investor and community development financial institution (CDFI), describes how they created a loan product to support small businesses in the green sector—as a bridge to accessing Greenhouse Gas Reduction Fund (GGRF) dollars. While GGRF capital promises to be transformative, gaps still remain that CDFIs can step in to fill.  

With restorative capital at the heart of its approach, PCV’s Good and Green loan product offers low-cost, flexible predevelopment capital that helps business owners bid for larger contracts in the green economy.  

It is part of PCV’s overarching support for small business owners and their communities in the fight for economic, racial, and gender justice. PCV works side-by-side with small business leaders and “solopreneurs,” offering impact-first restorative capital and pro bono business advising through its Good Jobs Innovation Lab, which propels thriving communities with equitable jobs.  

Bulbul Gupta, PVC’s president & CEO, Casey Bell, chief impact officer, and Bob Porter, chief lending officer, shared their insights and green lending strategy in the conversation below. 

Nzilani Glass Shop, a PCV client in Oakland, CA

Steve Hall: It's going to be extremely important for our partners to demystify green lending products and help build success in this emerging economy. How is your work in green lending impacting your communities, and how could your model be beneficial to other CDFIs?  

Bulbul Gupta: This really started for us three or four years ago when we were launching a strategy around what we call “restorative capital.” As an impact-first, civil rights-centered, community investment institution, we had to think about what it means to invest in historically excluded and redlined communities and what success looks like for us if a restorative capital strategy works. 

For a long time, PVC focused on good jobs, and really making sure that the small businesses we are investing in are helping to create good quality jobs for both those entrepreneurs and for their workers.  

When we thought about the next level of success for a good jobs and wealth-building strategy with restorative capital, we wanted to also make sure that the same communities that are disproportionately impacted by historical financial exclusion and redlining, that are also disproportionately impacted by climate injustice in the U.S., were reached by both our wealth-building and climate outcomes work. Now, what does it mean then to have a “Good and Green” jobs agenda so that the same communities are getting both climate outcomes and wealth-building outcomes through the power of a good job?  

We brought in Casey not only to kick off our Good Jobs Innovation Lab but also because of her climate background, to help us bake that into the new strategy at PCV and into the work of the Good Jobs Innovation Lab. We want to make sure that we're investing long-term in the just transition for U.S. communities as well, integrating racial, economic, and climate justice together. 

Hall: Casey, you brought great experience to PCV to help design loan products and make loan offerings. Can you tell us a little bit about that? 

Casey Bell: It’s really the team at PCV that makes this work possible. Their commitment to equity and learning and growing along this journey is really what allows us to do this work. We're a small business lender, and 98 percent of the businesses that are needed to make the climate economy work—construction, engineering, general contracting, manufacturing—are small businesses.  

Even in the best of times, between booking a sale or booking a project and booking revenue, there's a cash flow gap. We know that many of these folks might be revolving those expenses on a credit card. So that working capital need before the project even starts really emerged as the opportunity for us to develop our products.  

That $27 billion in GGRF funding coming out of the federal government is wealth-building money. But there is a gap; businesses are struggling with that cash flow gap and their ability to access the opportunities that are going to come on the table.  We can do some greening in Justice 40 communities, but economic development—economic opportunity—is really where the rubber hits the road.  

By focusing on decarbonization and energy efficiency, the built environment work that makes homes better, schools better, infrastructure better, you're creating ownership and you're creating repeated opportunities. Our Climate Justice Mobilization Fund sought specifically to address that gap. 

Through the Fund we've recently launched two products. Their intention, their restorative nature, is really in the flexibility, the affordability, and the wrap-around support that PCV is designing and in the partnerships we’re building. We’re working to ensure that we're not just cutting a survival check for our businesses but actually creating pathways to opportunity through our engagement with GGRF and beyond. 

Hall: Bob, how did you structure these new products? Could you give some examples of how PCV deploys them? 

Bob Porter: As we looked at green lending and we started talking to city, community, and partner organizations to understand what was needed, we realized we needed to have different underwriting, different loan terms and to roll out capital in a different way.  

We launched the “Good and Green” lending product with a 5% rate. We do interest-only for up to 12 months, and we do terms up to 84 months. One of our recent loans was to a minority business enterprise. The owner went through an apprenticeship program through the union, gained experience, and started his own construction company. He worked with the city of San Francisco and was eligible to make a bid but didn't have mobilization money. 

We provided $50,000 as a balloon: 12 months, no interest payments no principal, everything's due at the end. The business owner was able to secure a bid of $184,000 with that mobilization money. He's going to retrofit existing boilers in a school building, more energy efficient, more carbon offset from a greenhouse gas standpoint. That entrepreneur is now able to get a foot in the door with the city of San Francisco, expand his business by acquiring additional city contracts, mobilize, and get his business really off the ground. 

Gupta: Who doesn’t want healthier schools for our kids? 

PCV Team at Proyecto Diaz Coffee, a PCV client in Oakland, CA

Bell: We're really excited by the GGRF opportunity, particularly the Clean Communities Investment Accelerator (CCIA) opportunity, but we recognize that this is also a time for investor education around the predevelopment needs that are going into climate-economy work. A huge component of this is determining where CCIA capital fits in the work that we do, the partnerships that we develop and the projects that we support and where we need to be able to go deeper to ensure that the communities that we are serving are in a better and better position to meet the moment. 

We want small businesses to have the ability to do city contracts and county contracts, which prepares them for when bigger dollars hit both the CCIA side of GGRF as well as the technical assistance side. We want to be able to say these folks have stronger balance sheets, more hiring, their certifications are in place—and all the rest of the needs that we kept hearing from our community the last couple of years. That information helped us shape the design and the deployment of our loan products so these entrepreneurs are much better positioned to be part of the wealth-building opportunity that this historic GGRF investment presents and not be left behind one more time. 

Porter: As an example of a larger deal that we approved yesterday, two gentlemen who were working for other people formed a company in 2023 after 15 years of experience. They had an opportunity for a city contract of a little over $2 million. They had $100,000 to put into the deal, but they needed about $350,000 in mobilization to get that contract going. We're providing the other $250,000, and we're doing it as patient capital. We don't expect the first payment of interest and principal until April of next year and then we expect the final payment in June of next year, so loan terms specific to the deal support that contract.  

Hall: What can funders do to support what we’re talking about and to support green lending?  

Gupta: Once we knew that the predevelopment gap was really going to be the biggest gap that wasn't going to be funded with these GGRF guidelines, PCV started designing for that gap to set folks up for the continuum of capital that this opportunity now presents, and bringing funders and investors with us so that we can actually build the pipeline of deals to be more ready for the larger CDFIs, the EPA awardees, etc. And I think as more and more funders and investors have seen how the guidelines and the contracts have played out, they are coming to understand this predevelopment gap and how PCV’s “bread and butter” approach of working with small businesses and providing patient capital and innovative terms helps to address that pipeline constraint. 

That's really where our Climate Justice Mobilization Fund came from and some of the early commitments we have to support that work. Our approach of working with small businesses and providing patient capital and innovative terms is going to be more and more evident in the next year as more CDFIs look to curate these deals. More investors and funders are looking at how dollars are going to be able to fill the financing gap. That’s going to require blended capital, low-cost capital, grant funding to build the lending readiness, different loan terms, new partnerships, etc., to get to entrepreneurs who are poised to be part of the climate economy. 

This interview has been edited and condensed for clarity.