Exciting New Green Finance Platforms
The path to financing green energy is anything but “one-size-fits-all.” The mix of international, public, and private financing means a constantly shifting market. A report by the Carnegie Endowment suggests that investment in clean energy projects will only become more complex, as investment in the transition to renewable energy has grown at 25% annually to reach 2 trillion USD last year. To reach these figures, investments by pension funds, sovereign wealth funds, and endowments will play an important role. Similarly, public financing can provide investment and support new technology advancements that may otherwise be unfeasible.
New advances in renewable energy have not been limited to solar or wind but have created new financing platforms allowing for projects to find capital and average investors to both support and benefit from green energy. Creating new platforms to simplify the financing of renewable projects allows for more projects to find capital and reduces risk in project generation. These processes, such as the digital-first renewable loan program led by Pathward and BridgePeak Energy Capital, allow a simple way to provide financing to both renewable projects and corporations. This will include funding for solar and battery storage developers, hydrogen fuel cells, and electric vehicle charging stations.
Involving the “middle market” is key to this development. Chris Soupal, Divisional President of Commercial Finance at Pathward, defined the middle market as projects that are under 50 MW. By providing financing to this sector, the relationship between Pathward and BridgePeak aims to utilize the expertise and pricing of a regulated bank with the flexibility of a private credit fund.
The ability to reach middle markets using online platforms could serve the development of renewable energy projects worldwide. In conversation with Justin Schwartz, Co-Founder and Managing Partner at IMPAQTO Capital, he spoke to me about the need for more investment in missing middle projects in Andean Countries. As Schwartz explained, some capital sources, such as microfinancing and grant-funded seed capital, can help companies get off the ground. Similarly, international investors look for multimillion-dollar projects. That “missing middle” of companies needing investment between 50,000 and 500,000 dollars is what they are trying to achieve.
While a loan platform is undoubtedly a valuable way to reach the missing middle market, other uses of new technologies have sprung up to facilitate more manageable investment in climate technologies. This includes incorporating blockchain technologies and allowing average people to invest in clean energy projects. Plural Energy, a financial technology company, will enable investors to purchase parts of renewable energy projects. When asked about the uses of blockchain technology for renewable investment, Neil Devani, a leading investor in Plural Energy and founder of Necessary Ventures, spoke about the impact that distributed finance can have on democratizing renewable energy investment. This means allowing users to own tangible renewable energy assets, which results in everyday people having a direct economic stake in the transition to a green economy.
Whether the missing middle is defined in the size of the project or the size of investment, it is an underserved market for renewable energy projects. A Carnegie Endowment for International Peace report outlines how creative financing will play a role in creating and commercializing cutting-edge technologies. The report states, "Innovative financing and derisking measures will be needed to address the 'missing middle' of bringing first-of-a-kind pilots to demonstration scale.” If we can use new forms of financing to allow the average investor to provide capital to clean energy projects, the benefits of the clean energy transition will be felt more fully than ever.
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