Government-Funded Green Banks: Catalysts for the Green Transition

44 Pages Posted: 28 Mar 2025

See all articles by Claudio Rizzi

Claudio Rizzi

University of Navarra - Finance

Simon Xu

Harvard Business School

Paul Yoo

Kogod School of Business - American University

Date Written: March 11, 2025

Abstract

The Inflation Reduction Act (IRA) allocated $27 billion to the Greenhouse Gas Reduction Fund to funnel financing for clean energy and climate solutions. Government-funded Green Banks are delegated to administer the fund to attract and amplify private capital investment in reducing emissions. In this paper, we examine the efficacy of Green Banks in mobilizing local investment in the context of climate-related startups. Pre-and post-introduction of IRA in Congress, we show a significant increase in venture capital deals and the total investment amount for local climate-related startups in counties where a Green Bank has issued loans. Our evidence is consistent with Green Banks de-risking climate ventures to facilitate a bottom-up green transition.

Keywords: climate tech, renewable energy, green transition, Green banks, venture capital

JEL Classification: G23, G28, O44

Suggested Citation

Rizzi, Claudio and Xu, Simon and Yoo, Paul, Government-Funded Green Banks: Catalysts for the Green Transition (March 11, 2025). Available at SSRN: https://ssrn.com/abstract=5174254 or http://dx.doi.org/10.2139/ssrn.5174254

Claudio Rizzi (Contact Author)

University of Navarra - Finance ( email )

08034 Barcelona
Spain

Simon Xu

Harvard Business School ( email )

Paul Yoo

Kogod School of Business - American University ( email )

4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States

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