As the world races to decarbonize, the sustainable infrastructure market has exploded and is only expected to keep growing. However, the gulf between available capital and actual project investment remains wide. To maximize the growing potential of this market, sustainable investors need better internal operational and digital infrastructure to support their deal-making, especially at scale.
If the world is to achieve net zero by 2050, annual investment in low-emission capital stock must increase by $3.5 trillion. In 2023, investment worldwide was just $1.8 trillion, evidence of a major gulf that needs bridging.
Today, though, the energy transition’s desperately needed financing is being held back by manual processes and outdated systems that bottleneck transaction speeds and hinder investors’ ability to capitalize on the more than $120 trillion in global capital ready and waiting to be deployed. We need both better technology, and better industry collaboration.
Developing a solid framework for project finance — from software that stores data, tracks progress, and automates workflows to industry-wide standards that streamline the evaluation of individual deals — would allow investors to unleash the pent-up capital needed to maximize the value of these investments and meet the world’s urgent climate goals. For companies that are already making this a priority, like NY Green Bank, Standard Solar, and SMBC, it already is.
Investors across the private and public sectors and developers should leverage the tools available to maximize their opportunities in this promising market; they can think of the process in three stages.
First, digitize
Moving quickly without sacrificing investment quality begins with digitizing deal information.
Siloed data spread across multiple platforms can lead to errors and inconsistencies that result in miscommunication, and delays in approvals and decisions — and increased costs due to these mistakes. Storing documentation in a secure location that is easily accessible to all stakeholders creates one single source of truth. And that clarity yields productivity, as investors and developers can analyze the viability of a deal, share knowledge with other stakeholders, and have conversations built on a shared view of the same data.
This approach of clarity-via-digitization should also apply to covenants, compliance, impact metrics, and deal information across all counterparties. Laying the foundation for fruitful conversations across stakeholders is vital to advancing this market. From those conversations come the standards and best practices that not only individual funds but the sustainable infrastructure market as a whole sorely needs to grow.
Then, operationalize
Once things are digitized, investors and developers can put their data to work.
Automated and streamlined workflows can help automate portfolio reporting, including financial and SCADA performance data, eliminate the reliance on manual processes and disparate systems, cut down on human error, and save time on origination and underwriting — all of which ultimately leads to more deals. Modular templates for deal checklists, scorecards, due diligence questionnaires, and forms ensure consistency and reduce the time needed for each deal stage and infrastructure technology type.
Technology like this can save untold hours — a much-needed efficiency in an industry where Banyan Infrastructure’s inaugural project finance software report found more than half of funds are only planning to hire a few new employees in 2024. In the case of SMBC, for instance, which sought to gain a foothold in the commercial and industrial sustainable infrastructure market without driving up its cost of capital, the international banking giant cut its deal completion time by 25% thanks to a clear set of digital workflows, checklists, forms, and templates.
As more capital becomes available and investors strive to do more without scaling up their human resources and soft costs, digital solutions are vital to the future growth of this market.
Last, build a vision for the future
In the realm of sustainable infrastructure project finance, both speed and pragmatism are essential. Barclays has highlighted the high costs associated with closing deals manually, emphasizing the need for streamlined processes; meanwhile, Climate First Bank has expanded rapidly across multiple states by leveraging standardized and repeatable systems.
The ability to move quickly and efficiently is not just a competitive advantage; it’s a necessity. With billions of dollars at risk of being left on the table if sustainable investors, bankers, and developers do not improve their capital deployment efficiencies, the stakes are high.
Automating and streamlining processes will unlock this potential, allowing institutions to seize market opportunities and contribute to global sustainability goals. In essence, digital infrastructure acts as a catalyst for developing resilience, enabling organizations to prosper in the face of uncertainty and pave the way for a sustainable future. We have a monumental opportunity to build a new infrastructure at scale for the world’s energy needs — but first, we must build better infrastructure for ourselves.
Will Greene is the CEO and co-founder of Banyan Infrastructure, a project finance software platform designed to simplify, accelerate, and optimize the financing of sustainable infrastructure. The opinions represented in this contributed article are solely those of the author, and do not reflect the views of Latitude Media or any of its staff.
