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Private Financing Plays Critical Role in Climate Change Initiatives in the U.S. and Globally

The Inflation Reduction Act includes a Greenhouse Gas Reduction act that can be accessed through green banks, which play an important role in funding environmental initiatives.
2 minute read
November 3, 2022

The 2022 Inflation Reduction Act included $27 billion for a Greenhouse Gas Reduction Fund. These funds can be accessed through green banks, which play an important role in funding environmental initiatives by functioning as an effective bridge between public funds and the private sector.

There are more than 20 active green banks in the United States, with additional entities being developed or considered in over 20 states.

The concept of green banking is present not only in the United States, but throughout the world. In the context of private climate finance, the importance of this concept in emerging market economies has recently been highlighted by the International Monetary Fund (IMF).

In a recent blog post, the IMF stated, “Private climate financing must play a pivotal role as emerging markets and developing economies seek to curb greenhouse gas emissions and contain climate change while coping with its effects. Estimates vary, but these economies must collectively invest at least $1 trillion in energy infrastructure by 2030 and $3 trillion to $6 trillion across all sectors per year by 2050 to mitigate climate change by substantially reducing greenhouse gas emissions. In addition, a further $140 billion to $300 billion a year by 2030 is needed to adapt to the physical consequences of climate change, such as rising seas and intensifying droughts. This could sharply rise to between $520 billion and $1.75 trillion annually after 2050 depending on how effective climate mitigation measures have been. Boosting private climate financing quickly is essential.”

Expanding both the investor base and involvement of development financial institutions were among the financing needs that the IMF identified. Green banks are one way these financing needs can be addressed in both developed and emerging economies.

Through our assurance and advisory practices, Weaver can assist state and local government entities with evaluating the benefits of establishing green banks, the audit and compliance requirements associated with green banks and the processes and controls necessary for a strong lending environment. Contact us for information.