How to raise $500 billion in 5 years for clean energy
A spate of recent headlines touted President Obama’s announcement that a new federal program had secured $4 billion in commitments from private equity investors to finance new clean energy projects. Four billion sounds great, but it’s a drop in the bucket of the International Energy Agency’s estimate of what’s needed to keep global warming under 2 degrees centigrade—the IEA says we’ll need $500 billion in the next five years and $1 trillion by 2030. And that’s the real goal of the DOE’s new Clean Energy Investment Center. Impact investors already have $46 billion in the bucket, and globally, we’re halfway to that near-term $500 billion target. The new federal initiatives aim to provide the information that foundations and other large investors need in order to get comfortable joining the green energy rush. The Guardian offered up a great overview of how this announcement is about way more than this initial $4 billion:
“Energy is an incredibly capital-intensive sector of the economy,” said Phyllis Cuttino, director of the Pew Charitable Trust’s clean energy initiative. “Two guys can’t just create something in their garage. It has to be manufactured and deployed.” . . . Institutional investors often grapple with the arcana of clean technologies, while for potential do-gooders, impact investment structures – the intricacies of repayment rates and debt financing and equity bargains – often differ from traditional investments.
“You’re looking at trillions of dollars in capital,” said Reicher, “but getting folks who run those funds up the learning curve, getting them comfortable with those types of investments, is the challenge.” Clean-energy markets needed some logistical help, and the investment community called on world leaders to make it happen. With the White House’s promise to help investors navigate the field, that has started in earnest. (Read the entire Guardian article here)
The new initiatives include both the Clean Energy Investment Center, which will provide information on early-stage companies as well as research and analysis from the DOE and the National Laboratories, and an “aligned intermediary” that will specifically seek to provide a more aligned and scalable access point for long-term investors — such as families, foundations, endowments, pensions and sovereign funds — to the resource innovation investment ecosystem. According to Ashby Monk of the Stanford Global Projects Center, who helped design the program, “It’s not a fund. It’s actually more of an impact investment bank that serves the buy-side needs of these long-term investors.”
This is a great example of how government can help facilitate the changes we need, without taking the lead in funding itself. As these programs get rolled out, they should make it much easier for resilient investors to make informed decisions about some of their Zone 9 impact investments in an evolutionary national energy system.
Tags: climate, energy, financial assets, impact investing