Philanthropy’s role in providing renewable energy creates good jobs and social benefits

Philanthropy is in a unique position to leverage its resources and bridge-building capabilities to leverage billions of federal climate dollars to create more equitable local economies and jobs. But funders need to act with agility, and now.

The federal government is committing money to the clean energy transition, similar to the recently announced $27 billion in the Greenhouse Gas Reduction Fund. These investments can not only reduce climate change, but also transform communities as the public and private sectors mobilize to finance green energy projects.

But without targeted philanthropic support, benefits are likely to once again miss low-income, tribal and rural communities. Philanthropy can make sure this doesn’t happen by directing funds and attention to renewable energy investments, bridging the gap between federal dollars and local impact.

A $500 billion opportunity with challenges

As of 2021, Congress has authorized nearly $500 billion in green energy funding, including $370 billion for the Inflation Reduction Act, $77 billion for the bipartisan infrastructure bill, and $52 billion for the CHIPS and Science Act. These investments and incentives are also intended to boost private financing. For example, eight nonprofits that recently received funding through the Biden administration’s National Clean Investment Fund have pledged to raise nearly $7 in private capital for every dollar of federal investment.

Importantly, currently, 39% of new clean energy jobs, 27% of investments, and 44% of projects are in low-income communities. There is therefore a huge opportunity to transition to a greener, more resilient and more equitable economy. Job creation and economic development through renewable energy projects can have a significant impact on racial, gender and geographic inequalities.

There are, of course, challenges, such as a history of disruption and extraction from large-scale energy projects, mainly in rural and tribal communities. The benefits typically went to external shareholders and customers, while the local community experienced minimal employment and economic growth, and in some cases did not even benefit from the energy source.

Many low-income communities are rich in climate solutions developed out of necessity because they are disproportionately impacted by climate change. However, they lack the resources to start implementing projects. It takes a lot of expertise and capacity to access and absorb funds, understand byzantine permitting processes, and build the infrastructure to support projects.

Three ways philanthropy can help

To address the challenges and move the green energy transition towards justice and equality, philanthropy can focus on three areas:

1. Facilitate community contribution and benefit agreements

Community input is essential from the very beginning of energy projects to avoid the extractive mistakes of the past, build projects and infrastructure that meet local labor and energy needs, and build community support. In fact, the U.S. Department of Energy requires all recipients of clean energy financing grants and loans to develop community benefit plans. They are not legally binding like social benefits agreements, but will encourage partnership and shared benefits.

Philanthropy’s role in organizing and building bridges can facilitate these conversations, support planning, and help hold the private sector accountable for performance.

Take, for example, the Redwood Region Center for Community Climate and Resilience (CORE). CORE Hub facilitates community engagement around proposed offshore wind projects in the coastal Humboldt/Redwood region of California. This includes negotiations between community organizations, tribal leaders, local authorities and project supporters. The goal is to finalize a community benefits agreement that outlines what the project developer agrees to provide to residents. This is particularly noteworthy given the region’s history of resource exploitation, which has harmed tribal communities.

Community benefits agreements can codify the creation of things like good jobs and equitable pathways to them, affordable housing, energy justice, and even services like health clinics and schools. Philanthropy can support nonprofits and coalitions in these negotiations to protect community rights and interests and ensure that climate projects deliver a net positive result.

2. Funding green jobs and workforce development programs

An analysis by the National Skills Coalition estimates that federal investments in infrastructure and energy will support nearly 3 million jobs annually. This is a huge opportunity for more American workers to find higher-paying and in-demand jobs. The Brookings Institution found that low-income workers can earn $5 to $10 more per hour in green energy jobs compared to other jobs.

Philanthropy can improve these outcomes by first, increasing workforce development funding to fill green jobs with skilled workers. Some efforts are underway, including the creation of the Biden administration’s new Climate Corps aimed at training 20,000 young people in the jobs needed to combat climate change. The Families and Workforce Fund also recently announced the Powering Climate and Infrastructure Careers For All initiative, funded in part by the Irvine Foundation, to train and connect workers in low-income communities with access to climate and infrastructure jobs.

The second philanthropic priority should be to ensure more equitable access to jobs. Currently, the clean energy workforce is 30% women, 16% Latinx and 8% Black. The transition to a green economy could create a more diverse and representative workforce, and philanthropy can help ensure that job training and recruitment programs are equity-sensitive and fund partnerships and apprenticeship programs for non-traditional workers.

3. Advising state and local officials on the use of federal dollars

The public sector is responsible for allocating and distributing these funds, but philanthropy can advise it on how to do this to ensure greater social benefits. This may require some knowledge of the levers that public officials can use.

For example, the Biden administration has introduced a new direct payment option that makes it easier for state and local governments to access tax credits for clean energy development. Instead of applying for a competitive grant or loan, any tax-exempt entity that meets the requirements will receive financing. This gives the public sector a new imperative to shape the readiness of communities to meet the requirements for these investments. Philanthropy can increase awareness of funding opportunities, increase community input, and connect public sector decision-makers with candidates for ready-to-implement projects.

Another opportunity is new guidance from the Office of Management and Budget (OMB) that governs the administration of federal grants and contracts. OMB has eliminated the long-standing ban on geographic preferences. This means that state and local governments can, if they wish, implement local hiring and sourcing requirements in their projects. Philanthropy should help officials understand how they can use these guidelines to encourage good local job creation and increase community participation.

Poverty, poor infrastructure and climate change disproportionately impact some communities. Philanthropy can mitigate these impacts by helping direct massive federal and state funds to investable projects that improve communities and create good jobs. By leveraging the financial and conference power of the sector, we can make a significant difference in how clean energy investments reshape local economies for the benefit of all.

Don Howard is president and CEO of the James Irvine Foundation, which has one goal: to provide all low-income workers in California with the opportunity for economic advancement.

Matt Horton is a senior advisor at the Milken Institute and director of state policy and initiatives at Accelerator for America, helping government officials and community leaders shape infrastructure, jobs and equitable community development efforts.