Financial Innovation for Energy Innovation

Monk, Ashby H. B.; In, Soh Young

doi:10.2139/ssrn.3559638

Cited by 2 publications

(5 citation statements)

References 23 publications

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“…In theory, financial intermediaries should match investors and entrepreneurs by providing reliable information and reducing transaction costs [18][19][20][21][22][23]. In practice, we found that today's financial services industry has fostered information asymmetries between early-and late-stage investors, as well as increased transaction costs [17,[24][25][26].…”

Section: Introductionmentioning

confidence: 81%

“…For instance, researchers studying institutional investors find that while LTIs are theoretically well-suited to provide catalytic capital at scale in the long-term, they remain, in practice, untapped. LTIs should be willing partners in clean energy investments thanks to their long horizon and capacity and indeed desire to manage illiquidity risks, which is particularly well suited to the lifespan of clean energy projects [4,16,17,59,60]. Moreover, LTIs increasingly seek investment opportunities in real asset classes because they can provide steady cash flows that are less correlated to the returns from other existing investments and are also adjusted for inflation.…”

Section: Widening Valley Of Death In Clean Energy: An Analysis Of Lit...mentioning

confidence: 99%

“…There are very few financial products and services that meet LTIs' unique risk/return profiles while managing the risks specific to clean energy projects. First, this is due to the short-term, opportunistic behavior of current investment managers that may not be well-connected to source deals [17]. Investing through VC/PE funds incurs a very high cost of investing.…”

Section: Widening Valley Of Death In Clean Energy: An Analysis Of Lit...mentioning

confidence: 99%

“…Yet, this is the structure utilized by most long-term institutional investors (LTIs), such as pensions, endowments, sovereign funds, family offices, and foundations. As a result, despite their large-scale and long-term capital, LTIs remain largely untapped [4,17].…”

Section: Introductionmentioning

confidence: 99%

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Financing Energy Innovation: The Need for New Intermediaries in Clean Energy

Monk

Knox‐Hayes

2020

Sustainability

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This study aims to advance the understanding of and address the valley of death that is significantly widening in the clean energy domain due to its financing challenges. We conduct a case study on three new investment vehicles in the US energy sector (First Look Fund by Activate, Prime Impact Fund by Prime Coalition, and Aligned Climate Capital), which set their missions to contribute to bridging the valley of death in clean energy. While three cases focus on different technological development phases, they raise a consistent point that investment opportunities (and risks) are not assigned to the appropriate investors. We argue that current financial intermediaries have failed to effectively channel funding sources to entrepreneurs, as we evidence network fragmentation and information asymmetries among investor groups and companies. Therefore, we propose three intermediary functions that can facilitate intelligent and effective information flow among investors throughout the entire energy technology development cycle. Our findings highlight the emergence of collaborative platforms as critical pillars to address financing issues among new energy ventures.

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