Major U.S. financial institutions are backing away from climate commitments — all six largest American banks have exited the Net-Zero Banking Alliance, BlackRock has quit comparable initiatives, and the Federal Reserve has withdrawn from climate risk assessment networks. Is this merely rebranding for the Trump era, or a fundamental shift in how finance approaches sustainable investments?
In this episode of Open Circuit, we examine what’s driving this retreat — from political and legal pressures to economic realities. Despite the public pullback, investment data shows a more nuanced picture, even as institutions shift from decarbonizing portfolios to “de-risking” portfolios. We’ll also take a look at the market correction for private equity investments in clean energy.
Then, we dive into the ongoing debate about Bidenomics, sparked by economist Jason Furman’s recent Foreign Affairs critique. Did the Inflation Reduction Act’s climate provisions represent inefficient economic policy? Co-hosts Jigar Shah and Katherine Hamilton, who helped craft and implement the IRA, provide perspectives on design, implementation, and early results.
Credits: Co-hosted by Stephen Lacey, Jigar Shah, and Katherine Hamilton. Produced and edited by Stephen Lacey. Original music and engineering by Sean Marquand.
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Transcript
Stephen Lacey: A quick word before we start, we want to hear from you. If you want to send us a question for us to answer, shoot us an email at opencircuit@latitudemedia.com. You can either send us a voice memo and we’ll put your voice right in the show or just a written email. And if you want to read more stories on the topics we cover on this show every week, sign up to Latitude Media’s Daily, Weekly, or AI Energy Nexus newsletter. Just head on over to latitudemedia.com and hit the subscribe button.
So after a sweeping round of layoffs, I saw that the Department of Energy has a new supply chain director. Jigar, did you see this?
Jigar Shah: I saw it when you texted me about it. It’s crazy. What is he, a guy who runs car washes?
Stephen Lacey: Yeah, he’s an executive in the car wash industry. I guess this is their definition of a clean transition.
Jigar Shah: I mean…
Katherine Hamilton: Guys, our car wash people make more money than God. Are you kidding me? Car washes are like massive businesses.
Jigar Shah: Well, they get you on that subscription, right? $39 a month.
Katherine Hamilton: That is as funny as I’m getting today.
Stephen Lacey: From Latitude Media, this is Open Circuit. This week: Wall Street’s climate retreat. America’s largest banks are walking away from climate alliances and minimizing how they talk about sustainable investing. Is this just a reaction to the political moment or a lasting shift in the financial sector?
Meanwhile, private equity investors are going through their own recalibration on clean energy, running down assets, shedding costs. Is this just the tourists leaving? Or a sign of bigger trouble?
Plus, the Bidenomics debate. Did the Inflation Reduction Act succeed as economic policy? We’ll talk through the criticism and defense of the green industrial strategy.
Hi, I’m Stephen Lacey. I’m the executive editor at Latitude Media. Welcome. I’m joined by my co-hosts Jigar Shah and Katherine Hamilton. Jigar, you look like you’re in a hotel.
Jigar Shah: I am. I have returned to limited audience speaking, and so I’m at a hotel in downtown DC.
Stephen Lacey: Better than the airport lounges you used to record from.
Jigar Shah: Those were so good.
Katherine Hamilton: Or the New York City Public Library. That was my favorite.
Stephen Lacey: Oh yes.
Jigar Shah: Yes.
Stephen Lacey: Jigar is a clean energy investor. He’s the former director of the DOE’s Loan Programs Office. And Katherine Hamilton is the voice you heard. She’s the co-founder and chair of 38 North Solutions on the floor at home. As always, how are you, Katherine?
Katherine Hamilton: I’m great. Somebody yesterday in a meeting, one of my clients said, where I was having my meeting, “Is this how you tape your podcast?” And I was like, “No, no, no, no. You have no idea. I’m sitting on the floor with paper all around me. You’re never going to see that.”
Stephen Lacey: Do your legs ever fall asleep?
Katherine Hamilton: Oh yeah. I have to move around a lot.
Segment 1: Wall Street’s Climate Retreat
Stephen Lacey: So there’s a phrase we’ve been hearing a lot lately in the Trump era: anticipatory obedience. It’s happening everywhere you look. Tech companies are scrapping content moderation and fact-checking efforts. Media companies are settling lawsuits with Trump worried that more are on the way. Major corporations are dismantling diversity programs. And now Wall Street may be backing away from climate investing, or at least they have the appearance of backing away.
In early 2025, the six largest US banks—JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley—exited the United Nations-backed Net-Zero Banking Alliance, which was formed to guide banks in aligning their lending and investment portfolios with net zero emissions goals by the middle of the century. BlackRock, the world’s largest asset manager, left its corresponding alliance as well. The Federal Reserve has also withdrawn from a body of central banks and regulators assessing climate risk.
And this comes after years of legal and political pressure from Republicans on ESG broadly. Terms like “sustainability” and “ESG” are being replaced with “resilience,” reflecting this strategic pivot in response to a rapidly evolving political landscape.
So I want to talk about a few things here in this conversation. One is, does this signal a real shift in how banks are actually deploying dollars? How much does this matter? What are banks actually doing? Are they keeping pace with net zero investing goals? How are they thinking about investing in clean energy specifically? And then I want to look at private equity where we’ve seen a lot of recalibration and write-downs. What does it tell us about clean technologies as an asset class?
So let’s just start with a reaction to the news. What do you think, Katherine, about this exodus of major American banks from climate alliances? Is it merely optics in the Trump era or an actual genuine retreat?
Katherine Hamilton: So yeah, I think we need to have a deeper conversation about what they’re all actually doing. What it ends up meaning is that about half of the global banking assets are still in that alliance. There are still 141 members in 44 countries. So the European banks are now going to have more power within that alliance. And remember that alliance would, as you had mentioned, align lending and investment for net zero by 2050, also set interim targets, have a focus on less carbon-intensive sectors, mitigation, and then reporting on progress and emissions annually. I do think we need to dig in and find out what those institutions are actually doing and whether being part of this NZBA is the be-all and end-all, or if our investment is still going to move apace.
Stephen Lacey: Yeah. Jigar, what’s your reaction to this retreat from the alliances? Does it signal anything meaningful?
Jigar Shah: Not really. I mean, I think it’s pretty obvious that when you think about electricity investment, that there’s a recalibration across the globe towards clean energy and infrastructure. So we’ve sort of let go of the climate ESG virtue signaling, which I don’t think is the end of the world.
I think when you think about the fact that we have a huge increase in electricity demand globally, everyone is looking at the clean electricity technologies to meet most of that gap. And so I think that part’s happening. And then I think when you think about what happened with the California wildfires and some of the other things, there is this fundamental challenge right now with insurance markets, for instance.
And so all of the banks continue to work on banking climate risk, which is if you fund fossil fuels, what are the climate hazards? What are stranded assets? What’s happening with real estate investments and whether you have ocean rising issues. And so all of those things around figuring out what parts of their balance sheet are at risk are still things that they’re doing. But I think a lot of people conflate that work with decarbonization capital, which is how much money they’re allocating to clean energy. And that’s sort of a different thing too.
I think the other piece I would say just from a historical standpoint is, as somebody who’s unfortunately old enough now that I’ve lived through a couple of these cycles, there used to be this cycle in the nineties with Domini and Calvert and others where you would do exclusionary investing. You would not invest in fossil fuels, you would not invest in guns or defense. And what you found was that that actually led to lower returns.
And so that was replaced by ESG. ESG at the time was environment, social and governance. And what you did was you invested in every single company that you liked by sector, including defense, guns, oil and gas, etc., that were good at managing their business, which you reflected through how they treated the environment, how they were on social issues, how they were on governance issues.
One of my good friends, John Naiman at Light Green Advisors did a lot of the pioneering work on this. And what it shows is that people that are good at governance actually outperformed their peers. And so that still remains. People still check whether people are good in the environment, social and governance, because those companies actually have outstanding market returns.
And so I just feel like for whatever reason, we’ve decided to conflate all these things and now we’re not conflating them anymore. And so the macro trends I think are still strong, but people unfortunately are just not allowed to use some of these words.
Stephen Lacey: And I think it’s helpful to separate decarbonization from broader ESG efforts. And at a really simple level, I get this shift away. I mean, a lot of these banks are facing legal challenges and inquiries from public officials, a lot of really explicit legal attacks. There’s scrutiny from some regulators that believe that these ESG targets are coordinating a boycott of investment in the oil and gas industry.
So I mean, if we still think the work is getting done, I think it makes sense for the banks to move away from this language that is so politically charged and use other words for it. Katherine, you have been looking at the history of ESG, and maybe we can talk a little bit about that ESG picture a little bit more. How did we get to where we are where ESG became dominant and now we are moving away from it?
Katherine Hamilton: Yeah, it’s interesting because the roots of it, of course, and I think Jigar alluded to this, where it’s ethical investing. So that’s like even in the 1950s and through the seventies, religious and socially responsible investing to avoid tobacco, alcohol, weapons, things like that. In the eighties it was like anti-apartheid boycotts. So there have always been places where money tries to talk morally and ethically.
And then really from the 2010s to now, ESG investing gained a lot of traction with BlackRock, Vanguard, State Street, and they really built ESG practices into their investment strategies. And just to dig in a little bit on that, so environment is like what your impact is on the planet, like carbon emissions, but also waste management. Social can be labor practices, workforce, human rights, and then governance speaks to transparency, ethics, women on boards, things like that. So those are the three different pieces.
What it did was it really shone a light on how do we bring that and make it central or at least a piece of the way we think about investment. And I think what has happened recently is that what was the corporate sustainability officer, which was considered something you really needed to have to manage ESG, is now that expertise needed to be brought in, but now that it’s much more embedded throughout any organization.
So you are considering basically the components of ESG in every other thing you do. And that’s really the way to make impact is not to have it. Yes, first you want to shine a light on it, but then you want to bring it in and just make it part of standard operating procedure. And I think that is where we are at this point, and it’s at a point when we’re also trying to be mindful of the words we use. I don’t think there’s anything wrong with changing the words you use. What’s wrong is changing the actions you do. And I think the actions are changing far less than the words are changing.
Stephen Lacey: Jigar, what is happening with actual decarbonization investments as part of this shift? So I’ll give one example. Bloomberg New Energy Finance put together an analysis of the ratio of spending on low carbon infrastructure relative to fossil fuels. And they say that we need to see four-to-one investments in decarbonization over fossil fuels by 2030 to be on a net zero pathway. At the end of 2023, that ratio was 0.89 to one. It was slightly up from 2022 and 2021. Is this indicative of a lack of progress?
Jigar Shah: No. And this is also where I think people conflate stuff. So there are only a very few number of technologies that are actually covered by the banking sector. Those are technologies that are fully bankable. So think solar, wind, battery storage, electric vehicles. Maybe as of two years ago, electric vehicles were not really allowed into securitization profiles or general auto lending until maybe two years ago.
And so when you think about these large banking flows that you’re counting on this 0.89 or whatever that ratio is, you’re talking about a huge subset of technologies. So when you think about nuclear or geothermal or all these other technologies, that’s really done by private equity, innovation funds, growth funds, some of that stuff. And so that’s not in that calculation.
And so where we are right now is we are poised, because the technology has gotten so cheap, to be ready for this massive explosion in investing. So when you think about where battery storage is today, it is going to go up 10x from here because we just basically got started deploying batteries at scale in the last three or four years. And so now you’re going to see a huge deployment of batteries.
Electric vehicles are the same. We’re still on track to 50% of all cars in the entire world being sold being electric by 2030. And so that’s a huge increase from where we are today. When you think about solar, it’s still on an exponential curve. Shockingly, we are at 600 gigawatts last year and we’re going to be probably 700, 800 gigawatts next year. It’s nuts.
That story in Pakistan, how they forgot that all these people were importing panels into Pakistan and they had to use GIS mapping to find it. So I think when you think about what we’re talking about here, we’re only talking about mass fund flows that are coming from very conservative traditional banks, and that means a very short list of technologies that are allowed to be counted in that list.
The broader list of technologies that we’re commercializing that we accelerated greatly over the last four years, they’re going to take off like a rocket ship over the next six years.
Stephen Lacey: Katherine, what do you see in those numbers?
Katherine Hamilton: Yeah, what’s interesting, I was listening to a few episodes of S&P Global’s podcast that was called ESG Insider and changed its name to All Things Sustainable. And there was a reason for that.
Jigar Shah: GSE…
Katherine Hamilton: Well, right, they actually wanted to talk about all things sustainable because they also saw ESG as limiting in the conversation. And they had a really interesting interview with Marina Severinovski, who is the head of sustainability for Schroders. Schroders is a global asset manager. They have about a trillion dollars of assets under management—and just for scale, BlackRock is 10 times that size, but Schroders is still pretty big.
And what she said is that she’s looking at a bunch of different trends for sustainability investment including physical risk, the role of insurance adaptation and resilience, not just carbon mitigation. And also seeing the change in decarbonization as a constraint instead to unlocking value and not being a limitation, but seeing climate investment as having tailwinds because, of course, companies and firms that reduce their own emissions outperform their peers, and all of those enabling products and services like Jigar talks about—the demand for that is going to continue to grow.
So those were really big indicators to me. And she also said that Schroders did a survey of US institutional investors and 77% of the investors are already investing in or will invest in climate transition for three reasons. The first reason is diversification. The second reason is profit. And the third reason by a long shot down is decarbonization. So what that’s telling us is that these technologies that are really part of decarbonization are really the most profitable to invest in.
Stephen Lacey: And just touching on the climate risk and resiliency piece, as banks reframe these efforts, JP Morgan is a good example. They’ve taken a nuanced approach to climate issues. They withdrew from the Net-Zero Banking Alliance, but they’re still actively engaging with climate risk in a bunch of different ways.
They put together this climate-focused advisory series that was led by a scientist, a former scientist at NOAA. They put out a report clearly talking about the challenge for climate risk across the economy. They’re shifting from these public commitments to reduced emissions to a risk framework for helping clients navigate climate-related challenges. And then they’re just doing this work outside of formal climate alliances.
So it’s like a shift from a “let’s decarbonize our portfolio” to “our portfolio is at risk, let’s help our clients manage it” and we might see some of the same outcomes. Is this reflective of what we’re going to see from other banks?
Jigar Shah: It’s real and in your face. I mean, here’s the thing. Fifteen years ago we were projecting that all of these risks would materialize in bank portfolios. Today, they’re real. People have vacation homes that are on the water that they can’t sell. There are entire places in the United States where you can’t get insurance for your home. If you’re JP Morgan, do you want to hold the mortgage on that house? I don’t know. But that’s a conversation you should be having.
And so I think about the fact that a lot of electric utility companies continue to use outdated practices, and as a result they’re at 40% higher electricity rates. You have a number of people who are getting disconnected right now from their utility service because they can’t pay their bills. And so that’s another risk to the banking system. It’s another risk to your asset class.
So yes, banks have lots of ways of losing money and they have to study all of those ways of losing money. And increasingly, climate is at the top of the list of threats to their existing balance sheet. And so they would be foolish not to invest heavily in figuring all that stuff out. And then of course, once you figure it out, then you make banking decisions differently. So you limit your risk.
Katherine Hamilton: And not only do you have the banks, but you have the insurance companies that have to back up all those assets. So if you look at Chubb, which is one of the world’s largest insurance companies, they have science-based and engineering-based underwriting criteria, and they’ve said basically, we no longer underwrite risks related to the construction and operation of new coal-fired plants.
We don’t underwrite risks for companies that generate over 30% of revenues from thermal coal mining. They also won’t insure companies with more than 30% of energy production from coal. They will not underwrite those new risks and they no longer make new debt or equity investments in companies that generate more than 30% of revenues from mining or energy production from coal.
And that’s just one sector. I mean, they insure all kinds of projects, but they’re taking the approach that this is about science and technology.
Stephen Lacey: So Katherine, those are some great examples. At the same time, we’ve seen somewhere around $7 trillion invested among the world’s top banks since the Paris Climate Agreement was signed in 2015. What do you make of these investments in spite of the risks we just outlined?
Jigar Shah: Well, I feel like in general, this is why I’m happy that we’re moving away from these words because it was always going to be the case that these banks were going to renew working capital lines for these fossil fuel companies, or it was always going to be the case that they were going to provide debt to them. Why? Because we continue to use fossil fuels.
I mean, the notion that basically they should stop funding all businesses that they’ve supported for decades and say, you should get all your money from venture capitalists at 40% interest? Great. And then those companies either drill less or produce less or whatever it is, and then everyone pays much higher prices for airline tickets or much higher prices for gasoline or diesel or whatever? That was never going to be sustainable. It is always the case that affordability wins out over exclusionary practices.
So if you want to get rid of fossil fuels, the way you do it is you flood the world with clean energy, and the more excess clean energy there is, the less profitable fossil fuel is, right? It is very obvious on our electricity grid, for instance, that when you have excess solar or wind, who suffers? Natural gas power plants. They’re the ones who turn themselves down and make less money. That’s how this goes.
And so if we want fossil fuels to not have as much market share, then we need to flood the zone with clean energy. The notion that you’re going to deny them access to capital doesn’t make sense. If you try to do that, then their cost of capital will go up and the people that get hurt by that are poor people who are still on legacy systems where they have an internal combustion engine car or they’re using natural gas to heat their homes or whatever.
So it was always a fanciful approach to deny people access to capital so that their cost of capital was going to go up and poor people had to pay more for essential services.
Katherine Hamilton: Yeah, it’s interesting. I heard an interview with Brian DiMarino, who is the deputy director of global sustainability for JP Morgan Chase, and he said, “Science has told us what we need to do. Technology has told us we can do it,” which Jigar says constantly, “and economics will tell us whether it gets done or not.” So those are the three pieces, and JP Morgan Chase is saying that now.
Stephen Lacey: So Katherine, any predictions for how this space is going to shake out in the next few years?
Katherine Hamilton: Yeah, I think one thing we need to watch out for, and it remains to be seen whether it’s just a blip, which it could be, is all these lawsuits that the attorneys general are bringing. In late November, early December, a group of 11 state attorneys general led by Ken Paxton of Texas brought suit to—it was an antitrust suit—to BlackRock, State Street, Vanguard for undercutting coal prices, raising electricity prices and having ESG goals.
That’s the kind of thing that Attorney General of the United States, Pam Bondi, is very interested in litigating. So we have to kind of see what that does to the way these companies function. I don’t think it will change the underpinnings of what they’re doing, but it may cause a bit of a blip and you’ll see some more potentially syntax changes, hopefully not actual investment changes because they’re still on the hook for the basics of investing and making money for their shareholders. So we’ll have to see what happens with that, but it’s something I’m watching.
Segment 2: Private Equity and Clean Energy
Stephen Lacey: Let’s turn to the private equity piece now, which you mentioned briefly earlier. While we have these banks moving away from climate alliances, private equity firms are quietly marking down their clean energy investments. They’re cutting costs. BlackRock stunned investors by writing down its flagship Global Renewable Power Fund, and overhauling leadership and posting negative returns. What are we seeing in the private equity space, Jigar? How are clean energy assets valued today? And what does this tell us about how they were valued during the market enthusiasm of say, 2021 to 2022?
Jigar Shah: Yeah, it’s sort of crazy. I mean, when you think about the Loan Programs Office and all the loans that we have conditionally committed or put out the door, we had a way better track record than the private equity folks, who were supposedly a lot smarter.
I think in general, the weird thing about private equity and all these things is that the clean energy sector still operates like infrastructure, but I think people want it to have these magical returns. And ultimately it comes down to the same principles it’s always come down to, which is what are the cash flows coming out of these projects and are they executing and can they get the talent that they need to do their work?
And what you’re finding is a lot of the Cleantech investors basically decided to leave their principles at the door and to overpay for assets. And so when you look at venture capital, when you look at private equity, they overpaid for a lot of these projects in 2021 and 2022, and now they have to write these things down, not because the fundamental businesses are bad.
Some of them were dumb to begin with. NorthVolt building five battery manufacturing facilities at the same time and not finishing a single one was kind of dumb, right? That’s similar to Project Better Place. Remember way back when they were trying to do battery swapping on four continents at the same time without one of them working.
And so yes, those were just bad ideas that they shouldn’t have done because all of their friends at the country club did the deal. And so one of the challenges I see though is that they’re trying to blame cleantech as an asset class for their bad decision making. They’re saying, “Cleantech as an asset class is a bad asset class. We’re the smartest people in the world, and therefore, if we can’t make money on it, that means no one can.” That’s not true. They’re a lot of people making money on cleantech.
And when you look at the fact that 90% of everything getting added to the grid is clean, but more than that, when you look at the fact that MISO, the Midwest Independent System Operator is in trouble in terms of figuring out how to meet their reserve margins, and they’re using tech companies that are only four or five years old to help automate their interconnection queue, when you think about all of the essential amazing things that these startup companies are doing, and they’re getting accepted, when you look at Georgia Power who just signed a contract for their entire utility territory with Line Vision, which is amazing, when you look at TS Conductor who is not just doing small 20-mile segments anymore, but utilities across the border saying, “We’re going to use these advanced conductors to 3x our capacity on these existing lines,” we’ve never been more dominant, never been more ascendant.
And so there’s this weird thing where on one side, people made really bad investment decisions, and on the other side, cleantech has never been more dominant, but in order to protect their own reputations, the people who did a bad job of investing are badmouthing cleantech.
Katherine Hamilton: Yeah, I love the quote by Scott Jacobs, who’s the CEO of your old Generate Capital. In Bloomberg, he said there was an exuberant couple of years where tourists entered the space and they’re now leaving. And I like to think of them as tourists. Yeah, they just came, poked around, spent some money, left some trash behind and moved on.
And I’m an advisor to a growth equity company, MKB, which is North American. And just talking to folks like them and other private equity firms that have been in this space a long time, there’s so much more thoughtfulness that goes into this. I mean, these are not cowboys out there trying to make investments. They’re ones that look to scale, look long-term, look to seeing where there are some places where they can purchase assets that have been downgraded because the tourists have left them behind. So I agree with Jigar on this point.
Stephen Lacey: It might be actually helpful to step back, Jigar, and have you explain how private equity invests in this sector differently from the investment banks we were talking about earlier. Can you just give us a sense for the kinds of investors we’re talking about and what their strategies generally are?
Jigar Shah: Yeah, so when you go to a bank, a traditional bank, they really only look at cash flows. So they’ll say, how much money did you make the last two years? And can we lend against what we think you’re going to make over the next five years? And so this is similar to what S&P and Moody’s and Kroll and all the credit rating agencies do, right? They’ll say, we think that your business is strong and we’re going to give you a credit rating of triple B minus or single A.
And so most of the banks are making investment decisions based on your ability to pay back a loan based on cash flows that your business creates. When you look at private equity, they’re betting on your business plan and they’re betting on execution capabilities. So your company may not currently be profitable, you may have demonstrated your technology at scale, and they’re like, “Wow, that’s pretty awesome. That’s way better than the last thing that you’re competing with. And so we are going to bet big on you building your first-of-a-kind battery manufacturing facility or your first-of-a-kind commercial facility.”
And so they’re betting on the quality of the team, they’re betting on the quality of the business plan, they’re betting on offtake agreements, things like that. And so those are very risky deals that they try to de-risk through their expertise or through executives and residents that they might have on staff from people who’ve sold companies previously that they bring on board to do some sort of consulting for these companies, et cetera.
And private equity generally comes in after a company has raised $200 million worth of venture capital or B rounds or C rounds. So they usually come in for these $250 to $500 million check sizes. They’re generally not coming in at $20 million.
Stephen Lacey: And I realize I should have started with this line of questioning, but what kind of exuberance did we see in 2021 and 2022, and what does the market shake out look like in this space for private equity investors?
Jigar Shah: I think that in general, when you look at the valuations that people were getting in 2021 and 2022, which means if I give you $10 million and I think your company is worth $10 million, then 10 plus 10 is 20. I get 50% of your company. If I value your company at $90 million and then give you 10, then it’s worth a hundred million dollars and I get 10% of your company.
And so a lot of people were valuing companies that should have been valued at $10 million, at $90 million. And so they were not getting a good percentage. And now the question becomes why would they do that? And they would do that because they believe that something fundamentally has changed in the market and that these companies are going to be able to get customers far easier than in the past, and that they’re going to catch on and they’re going to be able to get to profitability super fast.
And what’s turned out to be the case, which has always been the case, is that it takes longer for these companies to actually catch on than you otherwise assumed. And so if that happens, then what happens is you have to pay the salaries of all of those people who work there for longer because that’s the burn rate that the company has.
And that doesn’t mean the companies are failing. The companies actually have good product market fit, which means a customer actually loves their technology, wants to buy it, they’re getting a lot of traction in the marketplace, but it could be that instead of having a hundred million dollars in sales, they have $20 million in sales and they’re not profitable at $20 million in sales, but they are profitable at a predicted hundred million dollars in sales.
And so that doesn’t mean the company itself is a bad company, it just meant that they had a mark of a hundred million dollars valuation. Now when they’re remarked and they have to raise money right now in 2025, people might say, “Well, you’re worth $25 million, not a hundred.” And that’s an uncomfortable conversation all around.
And so the question becomes, how do you have that conversation? No one wants to admit that they overvalued a company before. So they say, “Well, why don’t you raise more money at a hundred? So it didn’t go up in value, but it stayed flat.” And so maybe you have an investor that’s willing to do that, maybe you don’t. And so a lot of this is not the fact that the cleantech companies have a bad product or that people don’t want to buy it. It’s more that people thought that they were going to succeed far faster in 2021 than ended up taking them.
Stephen Lacey: We’ve heard some of these investors say that policy risk and policy changes have been a contributing factor to some of these write-downs. Katherine, how significant has the specter of policy changes or actual policy changes contributed to this?
Katherine Hamilton: Yeah, so far there haven’t been a lot of actual policy changes. There’s been a lot of noise. There’s a lot of talk about changes, but I think the fundamentals are still the same for all of these investors when they look at these projects and companies to invest in.
I just think there’s a lot of concern about impact. There’s a lot of concern about what will actually happen, and while they hear congressional members say, “We’re going to just potentially take a scalpel to some of these policies,” and then they see Elon Musk with a chainsaw, they’re not sure what to do with all of that.
Jigar Shah: Or a horror movie.
Katherine Hamilton: So my job is to say, “Look, actually, there could be a scalpel. There’ll be some that will be just completely left alone, the tax credits for example.” I mean, I think there are things we need to be diligent on, we need to push back on. I don’t think that’s going to necessarily change investing just based on everything that we’ve talked about so far.
Jigar Shah: But this also completely is unchanged from people’s thought processes in the summer of 2024. So by 2024, investors had already stopped investing. They realized that they overpaid for companies, and so this had nothing to do with the policy changes or the presidential election.
This has to do with the fact that people just woke up one morning and go like, “Oh, crap, we really overpaid.” And so that’s not the fault of the cleantech companies, although I would suggest to the cleantech companies, they shouldn’t have accepted such high valuations. It does cause problems in the future, but I do think it questions whether West Coast thinking makes a lot of sense past the seed round or the A round, right?
Once you go to the B and C round, my sense is you need a lot more East Coast investors. And East Coast investors are like, “Where are the fundamentals? Where are your customers? How are things going?” All these other things. And I think that people have just gotten drunk on West Coast money for a long time, and that has led to an undisciplined approach. And I think what you’re seeing now is a lot more disciplined East Coast style.
Stephen Lacey: Is there a buying opportunity here now?
Jigar Shah: Oh my god, it’s extraordinary. I think there’s nine commercial solar platforms for sale right now. I think there’s a bunch of blood in the water, obviously in the residential financing industry right now.
My sense is that the underlying desire for companies or for customers to get access to these products has never been stronger. I mean, people distrust their investor-owned utilities more than ever, and they want solar plus battery storage. What has to change is people have to realize that these are 20-year assets. You have to fund them like 20-year assets. You have to maintain them with 20 years of operations and maintenance, and people have to reserve the right amount of money so that you don’t run out of maintenance and leave customers stranded and all the things that were happening.
And so there’s a fundamental shift happening in the way in which we serve our customer base, but the customers—they’re clamoring for our solutions more than ever.
Segment 3: The Bidenomics Debate
Stephen Lacey: Let’s turn to a debate that’s been happening around economic policy under the Biden administration. So Jason Furman, a Harvard economist who chaired the Council of Economic Advisors under President Obama, recently published a provocative piece in Foreign Affairs called “The Post-Neoliberal Delusion and the Tragedy of Bidenomics.” It sparked quite a reaction from economists and policymakers who worked in the administration.
First to clarify some terms. So neoliberalism generally refers to the economic approach that dominated since the 1990s: free markets, global trade, deregulation, limited government intervention in markets with targeted social programs to address inequities. This is like Clinton, Obama era economic policies.
Post-neoliberalism is the Biden team’s attempt to move beyond this, embracing more active government involvement in shaping markets, using industrial policy to promote specific sectors like clean energy, and being maybe less concerned about deficits.
Furman’s argument is that this rejection of neoliberal economics led the Biden administration to overstimulate the economy with the American Rescue Plan, causing unnecessary inflation, while failing to deliver on the promises of economic transformation. And he claims that this delusion ultimately helped usher in Trump’s return.
So it got a lot of pushback. There’s also a climate piece to this that we’re going to talk about. So Furman takes aim specifically at the Inflation Reduction Act, arguing that Biden’s approach to climate investment, particularly in manufacturing, was inefficient compared to something like a carbon tax and hasn’t delivered the manufacturing renaissance it promised. Here’s Furman explaining this on the Foreign Affairs Interview podcast:
Jason Furman: There were a lot of people that fooled themselves into thinking that giving out subsidies to corporations is somehow progressive. No, it’s not. That might be a good way to reduce carbon emissions politically, although it’s limited in terms of scale, but it’s worth doing. But you should be a little bit haunted by the fact that you’re giving a lot of money to companies. A lot of that is going to shareholders. Most people who are affected by it aren’t getting any of the money because it’s just the few lucky people that end up with the jobs. And don’t build a whole economic philosophy around our climate plan as a Green New Deal that’s creating middle-class jobs when it’s not, and it’s not a great way to go about creating them.
So none of us are chief economists for presidents, but it does offer us a chance to reflect on what worked, what didn’t under the IRA as part of Biden’s green industrial push. And of course, Katherine, you were really pivotal to establishing the legislation and Jigar, you were there executing it. So Jigar, what’s your reaction to the critique generally? Why couldn’t you have just passed a damn carbon tax?
Jigar Shah: Honestly, I feel really bad for him. I mean, let’s think about it this way. This is a guy who in 2012, right, Obama won reelection by painting Mitt Romney as a private equity person who bought up a bunch of companies in the Midwest and shut down companies and shut down those jobs. Obama won Ohio by six points, right? Unthinkable today because he promised to bring manufacturing back to Ohio.
Right now, Jason Furman decides that he’s going to be the head of the Council on Economic Affairs for Obama and delivers nothing—like zero benefits to those people in Ohio. And so this is really him stretching to figure out how to defend his Obama-era econ legacy and misunderstanding the fundamentals of economic competitiveness.
When you think about, honestly, I think most of his piece was really about inflation and the fact that Biden shouldn’t have done the American Rescue Plan. Fine, but when you start to bring in this other stuff, remember that Trump decided to run in 2016 on the fact that neoliberalism has not delivered for the people in the Midwest, and he won all of those states as a result, and then Biden comes in and says, “Yes, we need to figure out how to actually deliver for those people” and didn’t change, frankly, very many Trump policies.
He just made them more functional by actually passing the CHIPS Science Act and the bipartisan law, the Inflation Reduction Act, and then started getting a lot of those folks in there. So I think part of this is really just Jason feeling really bad that he wouldn’t deliver anything while he was in office during the Obama administration.
But the other piece of it for me is that it is very obvious that the Biden administration failed miserably at defending its own record, right? For better or for worse, President Biden didn’t show up to the Palisades nuclear plant to say, “Hey, we are restarting this plant.” He didn’t show up to a lot of these places to say, “Look at all these jobs that are coming back.”
But I can tell you that there are a hundred technical colleges right now that are training tens of thousands of people for manufacturing jobs that will be available when those manufacturing plants are open in the next year or so, and Trump will probably take credit for all of those because the ribbon cuttings and the opening of those plants will happen at that moment.
But it is just shocking to me. The last thing I would say on this is that, remember, this is not about funding jobs for people in the middle class in the States. This is about the economic vitality of the United States, right? President Trump went to Angela Merkel and said, “You are taking a lot of risk by bringing all this natural gas in from Russia and running your entire industry based on this natural gas.” The Ukraine conflict proved him to be right.
And so we all decided that we needed to figure out how to shorten supply chains. In this country, 90% of all the clean energy solutions that are added to the grid are generally from imported products from another country, a country that we are actually pissing off on a regular basis.
And so today, because of the Inflation Reduction Act, we have 50 gigawatts of module manufacturing in the United States. We have wafer manufacturing going in with QCells, right? We are starting to onshore and reshore a lot of that supply chain. We will be manufacturing most of the EV batteries that we use by 2027 here in the United States. We’ll be manufacturing most of the utility-scale batteries that we are going to be deploying by 2029 right here in the United States.
So okay, yeah, maybe they’ll create some middle-class jobs, but I do think that we want to shorten the supply chains for these essential technologies that we plan to run our grid on. I think assuming that we are going to have a safe way to import 95% of that material from other countries forever was probably not something that was going to be as sustainable and as defensible from a national security standpoint as what we were doing in the past. And so I think he just misunderstands the fundamental reason for why we were shortening these supply chains.
Katherine Hamilton: You’ve gone to 40 different topics, Jigar. I cannot keep up with you.
Jigar Shah: I have so much to say, Katherine!
Stephen Lacey: So Katherine, your just initial reaction to the essay and these arguments?
Katherine Hamilton: Yeah. First of all, I have a hard time reading economists being so much smarter than I am and trying to tell me—I guess it would be called mansplaining—because yes, I was on the ground trying to get this stuff done and seeing how is this going to spin out? No, we are never going to get a carbon tax done. Wouldn’t that be awesomely elegant? Not going to happen politically, 100%.
The other thing is all these headwinds with the COVID—the worst month for COVID deaths were right when Biden was sworn in. And so the first thing he had to do was try to inject—he injected $1.9 trillion into the economy in the American Rescue Plan to try to do some recovery from COVID, which is really hard to do because it completely upended our jobs. The supply chain is still having trouble. Jigar has alluded to that.
I talked to Dawn James, who is an expert in sustainability who worked for Microsoft for a number of years, and I was talking to her about the ESG piece we were going to do, and she said, “The biggest thing is still supply chain resilience and critical materials.” And she said, “That’s why investment’s not going to go away, because we still have those issues.”
But what the Biden administration was really trying to do is figure out how do we really supercharge and put rocket boosters to scale technologies that we know work that have been invested in for a really long time. And so what if some of this money is going to go to corporates? Great. It’s all cost-shared anyway. Most of it, any of the grant programs are cost-shared. Let’s figure out how to really charge forward.
And they had expected 17% lower emissions by 2050 than before the Inflation Reduction Act. So like huge emission reductions while sending manufacturing on a hockey stick. Factory construction has more than doubled in the last five years. That is huge. So these are all construction worker jobs, and of course it takes a little while. There’s a lag time.
You build the factories with construction workers, and there are thousands and hundreds of thousands of those. Then you have people who work in the factory once the factories are built, and then you have to get the products out of the factory, installation, training the workforce to deploy all those technologies. And then on the backend, the Americans who stand to benefit from all those new technologies also have to be educated and understand how they can benefit and how to access.
But the whole Inflation Reduction Act, the whole model was let’s figure out how much we can inject and how many incentives can we build in so that directionally we’re going there and get this thing kickstarted, and it’s been kickstarted.
So the full benefits are not going to be felt for a bit, and that’s just normal because we have to start building big things that Jigar says, and that’s what we’re starting to do. And you look at states—I mean, 80% of the benefits are going to red states, but I noticed in Indiana, Canadian Solar is building a plant that will be enormous. It’s thousands of jobs in Indiana, and that’s as a result of 45X tax credit and all of the other policies that have been put into place in the Inflation Reduction Act and everything Jigar and all of his team are doing at DOE to make sure that these projects got started.
Jigar Shah: Indiana is getting a ton. They got this Stellantis battery manufacturing facility, the Wabash Ammonia facility, Entek battery separators. But the thing that bothers me the most even is just how lazy this is.
When you think about the fact that we were fighting an Obama tariff on solar panels in 2012, and I went to Furman and I went to others and I said, “Okay, great. You’re going to tax the solar industry. Fine. How are we going to manufacture here in the United States? Because presumably you want to put the tariffs on to protect American manufacturers, of which we have none. What are you doing on that?”
“Oh, I have no idea. But politically, we just need to put this tariff on the solar industry. So I’m so sorry, Jigar, but we’re going to tax the crap out of the solar industry.”
And then they doubled down on that tax in 2015, and they were like, “Let’s put another round of tariffs on the solar industry because you didn’t get us the first time around.”
And so I just think that when you think about the fact that the future of our entire century is based on these technologies—technologies that the US Department of Energy had a critical role in inventing—and we were going to say, “You know what? Gosh, that is such a great thing, but we should let China dominate all of these supply chains. That’s really what we should do, because Jason Furman doesn’t believe that we should do anything here in the United States.”
So let’s actually let China dominate all of these things. What would he have us do, exactly? What are the next set of technologies that Jason Furman would love for us to just ship over to China and give them? Remember, all of their nuclear plants are based on the AP 1000, which we invented here in the United States as well.
The thing that bothers me the most is I think it was just lazy. I think his entire piece was really about the American Rescue Plan, and then he just lumped in the rest of the stuff because he didn’t actually want to only stop at the American Rescue Plan. And I was like, I expect more from Harvard economists.
Stephen Lacey: Let me step back and try to channel one of his arguments. So as you said, his core argument was that we overstimulated the economy, we spent way more than we needed to, and that caused really significant inflationary effects, which impacted infrastructure.
So there is a clean energy component here that I want to tease out a little bit. So he notes that highway spending rose 36% from mid-2019 to mid-2024, but construction costs increased even more, partly because of this overstimulation of the economy, leaving real infrastructure spending down 17%.
So if we apply this to clean energy, specifically, the IRA earmarked hundreds of billions of dollars for clean energy projects, but we’ve of course seen inflationary effects across development and in manufacturing. And he says that the skyrocketing costs of construction have left the United States building less than before the law’s passage. So project costs rose, supply chains got strained, interest rates increased, all potentially reducing the buying power of those IRA dollars. Is there a case there?
Jigar Shah: No. I mean, it’s got to be the most intellectually lazy thing I’ve ever heard someone say. So on one side, you’re basically saying, we have inflation, right? And not just the US got affected by inflation, but everyone in the world got affected by inflation, right? Folks who overstimulated their economy, folks who understimulated their economy, everyone got hit by the inflation.
Now on this side, you’re basically saying, you know what would’ve been really good—I think what he’s inferring is if we actually left people with a crap load of potholes and no roads, we should have not built anything until Trump put us into a deep recession, and then we should have actually started doing stuff.
Who should have taken that advice? Jason Furman, because who didn’t actually bring employment back? Obama—for eight years, we had 10% unemployment. You remember when we actually wrote the Apollo Alliance, which is basically the Inflation Reduction Act, in 2007? He could have passed this thing in 2009 instead of actually the Waxman-Markey bill, and he could have done all this stuff when we had 10% unemployment. But guess who had no vision whatsoever? Jason Furman.
And so now we’re in a situation where he’s saying we had global inflation that had nothing to do with CHIPS and Science Bill or the IRA. It had to do with the fact that we had major supply chain disruptions and so much demand from people at Home Depot—they were doing stuff on their homes and whatever.
And he’s inferring that we should have actually just waited. We should have said, “You know what? We should have waited for four to six years to actually shorten our supply chains, and we should have subjected ourselves to these short supply chains that we just had a lot of PTSD about during COVID until a better time in the future when we would’ve had less inflation.” I mean, seriously, is that his argument?
Stephen Lacey: Well, I should bring in more foreign affairs macroeconomic think pieces here to get you riled up.
Jigar Shah: Just stop bringing in lazy foreign affairs articles. There’s a lot of really well-written foreign affairs articles, but not this one.
Katherine Hamilton: Yeah, there was a point that he made that I tend to agree with, which is that we have really slow permitting processes in the US. And so as you all know, we were working on a permitting reform bill right up to the last minute in December, hoping to get that over the finish line. It was something that Joe Manchin had really, really wanted to do for quite some time, had tried to make it happen. In the end, it kind of fell apart just for a number of political reasons.
But again, that’s something that remains to be done. That would’ve been kind of another leg on the stool of investment and carrots and sticks. There are a few sticks, certainly with EPA regs, but carrot sticks, and then this would be kind of regulatory reform that would’ve been really great to have happen too. And I think it’s something that’s still in the cards as we move forward. But that was a component too.
Jigar Shah: But it’s a conversation we had in 2013, because remember at the time, and I think we even talked about this on the Energy Gang at the time, we talked about the fact that the Republican Senate was trying to shut everything down and that Obama couldn’t pass any bills. And there was a conversation around for every new regulation that they passed, they should get rid of 10 that were not there.
Guess who shut it down? All of these people that were in the White House and the Obama administration saying, “Oh, that’s politically difficult to do.” So when they had their moment to reinvent government, which Clinton did so well from 1994 to 2000—I mean, he shed 460,000 government jobs during the reinventing government era under Clinton—Obama couldn’t do that either, right?
And so I just think that having somebody actually shoot from the sidelines in such a lazy fashion, right when he knew himself that he couldn’t implement jack while he was there because of the political moment, is a little rich.
Stephen Lacey: This actually brings us to an interesting point about what was possible during that specific political moment when the IRA was passed, Katherine. So I mean, his argument was, in theory, a carbon tax would’ve been much more efficient. We all understand that the politics of a carbon tax are impossible.
He said, we should have focused on permitting reform, et cetera, that you mentioned. That would’ve been a much more efficient way to get things built out in the country. But there was a really interesting political moment at the time that made the IRA possible. What was happening politically, why this solution from a political perspective?
Katherine Hamilton: Yeah, I mean, we had a series of bills. So the Bipartisan Infrastructure Law was passed, and that injected a whole bunch of funding into infrastructure. That was the infrastructure bill that everybody had been talking about doing and hadn’t. And then the CHIPS and Science Act passed.
And then there was this moment, and it was really iffy whether it would happen or not, but the Inflation Reduction Act—because remember it used to be called Build Back Better, and they changed it. Joe Manchin changed it to Inflation Reduction Act because they really felt like if we can inject this funding, but also incentives to drive investment.
And one of the things that Furman says that I thought was absolutely wrong was that he said that it crowded out private sector investment, which I think is absolutely not true. I think it brought in private sector investment in a huge way, in a way that had not been done before from utilities, from all kinds of other developers. It actually much more incentivized and leveraged private sector investment.
And I think there was a moment to do that. And it was a Democrats-only bill, of course. It was done under reconciliation, which is what the Republicans are trying to use now for the Trump tax bill. But it took a one vote—it took Vice President Harris to break the tie to make sure that it got passed—but there was a moment in time that it could happen.
And under Obama, my husband was working on the Waxman-Markey bill at the time. And of course, there were people who took that vote in the House for Nancy Pelosi who lost their seats in the next election because it didn’t get done in the Senate because the choice was: Are we doing climate or are we doing healthcare?
And certainly there’s an argument that we needed to do healthcare, that that was a priority, but they did not end up getting the climate bill over the finish line. And the Obama administration, they did the stimulus bill, of course, and got some things done through DOE then, but it certainly did not have the same impact as the Inflation Reduction Act has.
Jigar Shah: The thing that makes me so mad, Stephen, is that I am talking to 25 countries right now that want to copy the Inflation Reduction Act. This structure that we created is so politically powerful that everyone wants to copy it, and Jason Furman is just jealous.
He’s just like, “I didn’t do crap while I was the head of the CEA, and so I am going to crap on Biden’s legacy.” And look, I get the fact that Biden did a horrible job of communications. I am on it all the time. Terrible job on communications. I get it. No one’s ever heard of the Inflation Reduction Act, but so many countries from Brazil to India to Germany, to the UK, to Netherlands, et cetera, are saying, “We’re not going to be able to do all 20 sectors, but which sector do we love the most? How do we actually figure this out? How do we actually copy the Inflation Reduction Act? How do we do demand-side signals, supply-side signals, let’s copy the Loan Programs Office. Let’s do all these other things.”
And it’s just infuriating to me that somebody who is as smart as Jason would be so petty.
Katherine Hamilton: Well, it was funny because you’re totally right, Jigar, about other countries trying to copy—and Canada immediately, once it passed, freaked out. Nobody had ever done tax credits before. They were like, “Oh, let’s figure this out. We need to do tax credits because we want people to stay in Canada.” I mean, our ecosystems are so closely aligned and they have been throwing money at businesses to stay in Canada.
So you’re right, it has served as a model. I will push back a little bit on the communication piece, not to say—and this was an issue in the Obama presidency too. How do you talk about what actually got done with the stimulus package? I never heard the outcome of the stimulus bill and I worked on huge pieces of it—is that the information ecosystem is really different now. So people don’t watch the nightly news as much with Kamala Harris or President Biden going to a factory ribbon cutting. People just don’t do that.
Jigar Shah: He didn’t go to any factory ribbon cutting, Katherine.
Katherine Hamilton: I just want to say the information ecosystem is so different and we do not know how to use it well at all.
Jigar Shah: The only person who matters is the president of the United States. It doesn’t matter what Chris Wright says from DOE. What matters is the fact that President Trump talks about stuff every single day. Right? We just didn’t have that with Biden.
Katherine Hamilton: But he uses different kinds of media too, so also the Biden administration did not know how to use the media tools that they had at their disposal. They just didn’t.
Stephen Lacey: Yeah, I agree with both of you. I think Katherine, the way that the media is structured today makes it much more difficult to get your message across. But I also agree with Jigar that this was one of the biggest messaging failures of the administration, but Biden was incapable of messaging on a lot of different issues. He was just not out front talking about the benefits of his policies, and so I think it was a symptom of a greater problem, but this was really bad messaging. I think that was very clear in the polling.
And I guess the question is, what’s the legacy going to be of the IRA to round this out? What do you think the economic legacy of the IRA will be?
Jigar Shah: It’s going to be extraordinary. I just think that by the end of this decade, we will actually make sure that we manufacture batteries. And remember that we have two of the most disruptive, amazing battery breakthroughs in our pipeline right now, and they’re going to be ready to go by 2028, 2029.
If we don’t have a huge battery manufacturing ecosystem here, we’ll be forced to license that technology to China like we did all of our other technologies. You can’t hold those investors back and say, “Sorry, you have to go out of business.” And so it matters that we actually start battery manufacturing in 27 and 28 so that we can actually put these next layer innovations such that we leapfrog China.
The same thing is true with the nuclear renaissance. We’ve got 10 of the best technologies in the world. We got to figure out how to make them work. Enhance geothermal—we got to figure out how to actually get that across the bridge to bankability, advanced conductors, virtual power plants. All of our technology is extraordinary, and we are in a moment right now where I think we’re going to actually be a lithium exporter from the United States by 2034.
What are we doing here? When you think about the fact that we have critical mineral supply chains, battery supply chains, solar supply chains, I just think that this is really about outcomes. This is about us being more secure as a country around the technologies that we’re going to use to be powering our entire economy through the end of the century. I’ll be damned if everything is imported.
Katherine Hamilton: Yeah. My hope is that just as ESG doesn’t have to be a separate piece of any corporation that can be embedded within a corporation, that clean energy and climate mitigation technologies will just become part of the way we do business. And I think that’s what the result of the IRA will be, that it will be part of the way we do things that Republicans, without even knowing it will completely support it. Whether or not they believe that climate change even exists, and everybody will eventually just see it as business as usual.
Outro
Stephen Lacey: Alright, I think that rounds out the show. I’ve got pit stains now. You made me sweat.
Katherine Hamilton: Jigar! You’re on a tear today.
Stephen Lacey: That’s it for this week’s Open Circuit. Thanks to Jigar Shah and Katherine Hamilton. Open Circuit is produced by Latitude Media. The show is edited by me. Sean Marquand is our technical director. He also wrote our theme song. Anne Bailey is our senior podcast editor.
Latitude is supported by Prelude Ventures. Prelude backs visionaries accelerating climate innovation that will reshape the global economy for the betterment of people and planet. Learn more at preludeventures.com.
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