Sponsoring a Just Transition

 Many banks are being targeted by shareholder activists for their investments in unsustainable sectors. See more on these campaigns here.  One bank, with a lending portfolio heavy in coal in the Appalachian region, with obvious material concerns regarding their strategic business model for lending, has also expressed concern that their lending currently supports viable industries and jobs and if they stopped lending, those too would disappear. I sought to determine if that was a valid assessment and to explore other potential economic investments in Appalachian coal country.   

 

What I found actually surprised me. There was tremendous ground-work for an economic industrial transition happening in these communities. Communities in coal country had taken lessons from those in the southern Appalachian country in North Carolina who had weathered the transition away from a booming Tobacco industry by building up local sustainable agriculture and cottage industries around it. More on the success of those initiatives here.  Some front runners for philanthropic and potentially even future impact investment would be enterprises coming out of the Mountain Association for Community Economic Development and local organization and cooperatives/enterprises in Central Appalachia supporting what they call a Just Transition model.  While many of the enterprises are cooperatives and the development corporations are currently non-profits, private lending can certainly be paired with government funding by way of Community Development Block Grant funding, to scale-up these endeavors significantly.  It’s easy to envision a bank partnering with communities in the development of even larger Community Development Corporations in this region which could mobilize a significant amount of new economic activity.
  

Most large industrial transitions will require policy and governmental facilitation.  In the Just Transition model, federal and/or state government funds would be set aside to address the needs of those affected by industry displacements.  The funds would be designated for direct assistance, worker training and/or investment in new industries or small-scale farming or enterprise loans. These kinds of funding vehicles have been proposed for Tobacco farmers in Appalachia, (in McCain’s 1997 Universal Tobacco Settlement Act and with the Tobacco Community Revitalization Trust Fund); for the Native communities in the Southwest, from pollution tax revenue from Southern California Edison; and in legislation proposed in Massachusetts, (H.2935).  

The Department of Energy has been rapidly scaling up funding for alternative energy programs and lending capacity and the Obama Administration has advanced a number of programs directed at creating jobs and supporting the creation of new business. These communities, in collaboration with private investors, could rapidly advance their mutual goals by taking advantage of these opportunities.  My suggestion for banks in these areas is to hire some policy people familiar with government requests for proposal and to pair up with good local community leaders and make it happen. 

With serious commitment from traditional lenders in regions that are preparing for economic industrial transitions, alongside governmental targeted programs and sufficient community momentum, these transitions could be not only effective at minimizing the damage of change, but could revitalize entire regions and transform communities.