By Jennifer Kho

Bank of America said it will plunk down a cool $20 billion to finance green business activities over the next decade.

Cleantech industry watchers said the news, announced late Tuesday, represents a major stride into the mainstream.

“This is a signal that we’re seeing a mainstreaming of what was considered a little outlying voice just a few years ago,” said Robert Wilder, chief executive of WilderShares, which manages three energy indices.

“One of the biggest banks giving extra consideration to products or projects that are lower-carbon is one of the greatest things we could see happen,” he added. “And putting $20 billion on the line—not chump change—shows they truly believe in their marrow that they can make money by being green.”

The initiative includes $18 billion to provide financing and advice on matters like green real estate projects, and development and adoption of energy-efficient or low-carbon technologies.

Another $2 billion will go toward consumer products, such as a reduced interest rate for mortgages for energy-efficient homes and an eco-friendly credit card offering incentives for green purchases and donating money to an environmental organization.

Bank of America also said it will start trading carbon emissions credits to help its clients offset their carbon use, and will give “favorable consideration” to provide loans for clients creating and adopting environmentally sustainable products, services, and technologies.

The initiative is significant because it could help clean technologies overcome a significant barrier: Even if a technology can bring buyers a return on their investment, they need to be able to finance the initial costs.

Getting a loan for solar projects is still fairly unusual, so most banks aren’t prepared to offer low-interest loans for those projects, Mr. Wilder said.

“If it’s not in their book, sometimes they will say no or offer a higher rate,” he said. “Now this bank is predisposing itself to say, ‘Solar? We can do that.’ It’s not sexy, but these are real-world rubber-meets-the-road issues. Mundane details like the inability to get a loan can kill a project.”

Despite the announcement, shares of Bank of America fell $0.35 to close at $50.59 in Friday’s trading.

Overcoming Barriers

This initiative eliminates the question about whether or not funding will be available for these types of projects and also will help overcome the barrier of “just getting people thinking about it,” said Jonathan Klein, founder of the Topline Strategy Group.

“It creates incentives for people to start considering these things, and helps create awareness among the developer and home buyer community that these things are available,” he said.

Joel Makower, executive editor of GreenBiz.com, said the Bank of America news is a sign that mainstream banks are ready to support clean technologies with much-needed capital and with their power—through the web, monthly statements, and direct mail—to spread the green message to their clients.

“This is extraordinary,” he said. “For clean technologies to become a mainstream part of the marketplace, we need the full spectrum of financial institutions. The VC community has been engaged increasingly for years, but the mainstream banking community has been slower to the gate. In some ways, this completes the financial picture.”

Of course, Bank of America is not the first financial institution to go green. In November, San Francisco’s New Resource Bank partnered with SunPower to provide financing for solar projects.

Right Direction

But BofA’s is the largest such announcement so far.

“It’s clear with $20 billion, this is not a token gesture,” Mr. Makower said.

Peter Liu, chief executive of New Resource Bank, said the Bank of America announcement is “a great development” for the company’s corporate and retail clients, while New Resource Bank focuses more on startups and entrepreneurs.