In the chaotic first few weeks of the Trump administration, as the government has frozen and unfrozen billions of dollars of federal funding, Environmental Protection Agency chief Lee Zeldin has focused on one program in particular. For almost a month, he has been waging a crusade against the EPA’s Greenhouse Gas Reduction Fund, a Biden-era program designed to finance climate action in underinvested areas.

For this initiative, the Biden EPA doled out billions of dollars to a handful of climate-focused nonprofits to help them set up their own “green banks.” These banks would then lend out the money to support solar panels and other clean energy development in areas that don’t typically draw a lot of investment, in the hopes of mobilizing private money for the same projects. 

Zeldin has attacked the green fund as “criminal” and sent letters to the climate nonprofits notifying them that their contracts are being terminated “effective immediately. He has alleged without evidence that the Biden administration’s attempts to dole out funding after the 2024 election, and its selection of climate-focused nonprofits, are evidence of “waste and self-dealing.” Meanwhile, the Justice Department has attempted to open a grand jury investigation into the program, causing at least one senior prosecutor to resign, and the Federal Bureau of Investigation has also begun a probe into the money despite resistance from a judge. That’s in spite of the fact that Congress mandated the program when it passed the Inflation Reduction Act in 2022, and that the executive branch has no constitutional authority to override congressional spending.

Stuck in the middle of the administration’s feud against the green fund recipients is Citibank, the third-largest financial institution in the United States. The Biden administration entrusted Citi to manage the massive $20 billion program, but in the weeks since Zeldin’s campaign began, the bank has allegedly refused to release the money to grantees. It finds itself between a rock and a hard place — either give the money back to the EPA and breach its contracts with the climate nonprofits, or release the money to green grantees and risk President Donald Trump’s ire. The longer the bank holds out, the more risk there is that one of the IRA’s most ambitious and novel programs could collapse altogether.

Now the nonprofits charged with setting up these green banks are fighting back. Climate United Fund, the largest grantee from the program, filed a lawsuit over the weekend against both the EPA and Citi to secure its $7 billion grant. The nonprofit’s lawsuit accuses the agency of illegally pressuring Citi to withhold funds and the bank of breaching its contract with Climate United. Two other nonprofits, the Coalition for Green Capital and Power Forward Communities, filed suit this week as well to reactivate their respective $5 billion and $2 billion grants. 

“We’re going to court for the communities we serve — not because we want to, but because we have to,” said Climate United Fund’s CEO, Beth Bafford, in a statement. “This isn’t about politics; it’s about economics.”

On Tuesday, hours after the third nonprofit filed its lawsuit, the the EPA announced that it had “notified [the nonprofits] of the termination” of the green bank program. EPA said it would “re-obligate” the Biden-era money, but did not say whether Citi had returned the funds. A representative for one grantee said she did not know the status of the funding.

Most federal grantees access funding through a Treasury Department portal known as the Automated Standard Application for Payments or ASAP. Cities and nonprofits log into the portal and request electronic cash transfers in order to draw down the money the government has promised them. It’s not that different from filing an expense report in an online HR application at your job.

In the first weeks of the Trump administration, as the White House issued an executive order that “pause12” all funding from the Inflation Reduction Act, many grantees found they were unable to access this system. After multiple court orders, the Trump administration began to release some of this money from the Treasury. Some school districts have drawn down money to pay for clean buses, and some community banks have pulled down money from the $7 billion Solar for All program, which helps pay for energy improvements in low-income households. However, many grantees have said their money is still unavailable.

The green bank program doesn’t use ASAP. The program was designed to dole out nine- and ten-figure grants to a half-dozen nonprofits, giving each one seed money to start its own climate-focused bank. Most of these nonprofits were purpose-built to apply for the green bank program. Each one is a partnership between several community-focused financial institutions — Climate United, for instance, was founded by entities including Calvert Impact, a socially oriented investment fund, and Self-Help, a nonprofit credit union. The organization aimed to finance projects such as solar farms and electric truck fleets — and as project developers paid the money back, Climate United would lend it out to support different green initiatives. They used these initial loans to “de-risk” energy projects, making it easier to raise additional money from private-sector lenders. 

This kind of program required a different sort of financial arrangement, and that’s where Citibank came in. Just four days before the 2024 election, Citi signed a contract with the Biden administration to help manage the green bank money, according to documentation filed with Climate United’s lawsuit. The bank agreed to hold Climate United’s funding and that of other grantees in money-market accounts where it would earn investment income. When Climate United and other green funds needed money, Citi was supposed to liquidate a portion of their account and distribute the money within a day or so.

Holding the money at Citi rather than the Treasury was supposed to make it easier for the grantees to raise private cash for energy projects. “One of the three goals of the program is private sector leverage,” said Adam Kent, who is the director of blended and inclusive finance at the environmental nonprofit Natural Resources Defense Council, which is not involved in any of the green banks. “Having the funding at Citi allows the awardees to book that award on their balance sheet, which allows them to go raise additional private capital.”

But on February 19, when Climate United attempted to draw funding down from its account, the fund received no response from Citi, according to the lawsuit. Climate United and its lawyers say they attempted to contact the bank no fewer than seven times over the course of two weeks before the bank responded. On March 3, a representative for the bank told the group that it had “forwarded [Climate United’s message]” to the EPA “for an appropriate response.” In a follow-up email, the bank said it was “awaiting further guidance.” The other two nonprofits that filed lawsuits also said that Citi refused to offer them clarity about the status of their money.

In response to an inquiry from Grist, the EPA said it does not comment on pending litigation. Citi did not respond to Grist’s request for comment. The Bureau of the Fiscal Service, which regulates financial agreements like the one between EPA and Citi, also did not respond to a request for comment.

A funding delay of a few months could kneecap or even collapse the green bank program. In a declaration that accompanied Climate United’s lawsuit, Bafford said the nonprofit “cannot currently access funds to pay its payroll and other expenses.” She went on to say that “even temporary loss of access to its primary funding will severely damage Climate United’s internal operations, its financing programs … and its long-term reputation and ability to carry out its mission in the market.”

Kent concurs with that assessment. Even if Climate United and its fellow grantees succeed in getting their money, he said, the Trump administration’s vendetta against the program could hamper private interest in future solar farms and energy projects. 

“I think the attacks on this program have definitely had chilling effects on [investors’] desire to say, ‘Hey, I actually think this is going to benefit my community,’” he said.

Zeldin has maintained his singular focus on the green bank program even as EPA has begun to unfreeze other grants. He has referred to the disbursement to Citi as a “rushed effort” to shield money from Trump’s oversight. But in a twist, the administration has had more success freezing money that is housed at Citi than it has had freezing money at Treasury, where it has partially complied with court orders that require it to release some grants. 

This isn’t the first time that Citi has found itself in the middle of a fight between the Trump administration and a federal grantee. Last month, the Federal Emergency Management Agency clawed back some $80 million from a Citibank account owned by New York City. The outgoing Biden administration had sent New York the money to house migrants at hotel shelters, but because the transaction had only taken place a few weeks earlier, Trump’s FEMA was able to reverse through the Automated Clearing House transfer system without exerting political pressure on the bank. New York City has since sued to reclaim the money.

Even if a court orders Citi to restore the money to Climate United and other grantees, the Trump administration’s attempts to pressure the bank do not bode well for the fate of future climate investment — or for democracy itself, said Hana Vizcarra, a senior attorney at the nonprofit legal firm Earthjustice, which is not involved in the lawsuits.. 

“Any time the government is targeting private sector institutions or others, it makes for a dangerous dynamic,” she said. “I think we’re seeing that in a lot of different places right now, and it can lead to some unpredictable actions in response.”

Editor’s note: Natural Resources Defense Council and Earthjustice are advertisers with Grist. Advertisers have no role in Grist’s editorial decisions.