- What We Do
- Sector Focus & Industry Experience
- Project Finance
- Impact Capital
- Where We Work
As clean energy and other “renewables” technologies prove commercially viable and reliable (low risk, relatively high reward), they become increasingly popular with project developers and more risk-averse investors and asset managers worldwide.
While early stage venture capital remains a key source of technology innovation and new jobs, in the current economy, early and late stage project finance (more on the difference between “project” and “venture” capital), particularly in deploying clean technologies in developing countries, continues to deliver:
- Above average returns, as the economic fundamentals are typically superior to US-based, venture plays, at far lower risk profiles, and where debt can be secured offering leverage to preserve equity for the owners. Affordable, long-term senior debt or construction loans keep working capital liquid and accelerates scale-up.
- A source of positive social impacts, including good jobs with the potential to help lift people out of poverty … enabling self-reliance, communities that are autonomous, prosperous and self organizing
- Often a powerful and sustainable way to protect valuable natural resources — projects begin to push back on traditional “take-make-waste” economic development pressures
- An engine for sustainable economic development and improved quality of life for populations typically overlooked and ignored by Western-style capitalism
- A “free and open market” — not reliant upon grants (though they can still be leveraged when available for R&D, technical assistance, etc.), market-distorting incentives or manipulative policies — and thus a more sustainable path to a cleaner environment and a just society.
The true cost of capital: Project principals, sponsors and equity owners appreciate access to affordable, non-dilutive capital, preserving ownership stakes, with loans secured by project assets, and repaid to investors at nominal costs (low interest rates, if that matters) to the principals. Some borrowers actually prefer to pay greater than market rates because there is less paperwork involved (think Mafia). However, qualified and professional teams can obtain long-term debt at or below market rates (sometimes called “concessionary” loans), which is a common scenario in impact investing, as roughly one third of investors recently said of their expectations for returns. See also, 2013 article on impact investing for sustainability.
Where is project finance most cost effective in this current economy, and why? Key territories include developing economies, frontier and emerging markets worldwide, including Latin America (especially Brazil, Chile, Ecuador and Peru), Middle East / Northern Africa (MENA), Southeast Asia (particularly Malaysia, Vietnam, Thailand, etc.), S. Korea, India, and others. See project finance frequently asked questions, or where we work.
Ripe for Innovation: In many developing countries that lack a well-regulated banking system for affordable lending, or the physical assets for telephones or electricity transmission, for example, clean technology projects for “distributed” (local) power generation prove more affordable than building infrastructure. This is so-called “leapfrog” innovation (see references to Stuart Hart’s research, below). In some regions, the answer is both distributed power and building necessary infrastructure, to prepare for further development and growing regional affluence.
Internationally, clean energy, health and sustainability-related project finance is growing and succeeding, one of the few bright spots in the current global economy. It works at the intersection of purpose-driven “impact” investing, positive social change and sustainable business.
- What’s the difference between venture/corporate finance and “project” finance?
- Looking back, Stuart Hart was right, that the economic crisis of 2008-2010 was “good” for sustainability, per his article, “Converging On Green” (see PDF pg 16 of 55 , and its reference to “leapfrog innovation” on pg. 21/55. About Stuart Hart
- Low Carbon Development and Poverty Alleviation: Options for development cooperation in energy, agriculture and forestry (PDF, DIIS Report 2009:20, August 2009, 104 p.)
- Highlights of 2017 “Climate Reckoning” at Harvard University
- Workshop: Social & Environmental Aspects of Fundraising at “Climate Reckoning” Conference (Harvard)
- Water, Soil, Heat and Carbon — the shift hits the fan
- Impact Investing reaching mainstream acceptance — will it outpace financial-only returns?
- Panel Discussion: food, water and climate change mitigation