Mobilising and scaling up new ways of sustainable finance
Getting the world to net zero requires new clean technologies that still have to be developed and scaled-up. To meet the huge amount of investment this requires, alternative ways of finance must be mobilised. The advantages and downsides of new avenues of capital mobilisation were discussed in this session of the EU Sustainable Investment Summit that gathered representatives of different sectors, which will definitely play an important role to meet this challenge.
The discussion opened with a keynote address from Bill Gates, Founder of Breakthrough Energy and Co-chair of the Bill & Melinda Gates Foundation, who appealed to the urgency of acting now to find new ways to finance the innovation and transition to net-zero.
“We already have some clean technologies that are quite cost-competitive, but it took many decades and early funders willing to pay that premium to develop them,” he said. The challenge, he added, is that “about half of the emission reductions that we need to achieve require new clean technologies that do not exist yet. We need to develop solutions rapidly so we can quickly get them to scale,” he stated.
Bill Gates founded Breakthrough Energy, a network of initiatives aimed at getting the world to net-zero emissions by 2050. He spoke about the need for programmes like Breakthrough Energy Catalyst, a new model for public-private partnerships that will boost investments in critical climate technologies and accelerate their development. Catalyst has already announced its collaboration with the European Commission and European Investment Bank, as well as with the U.S. Department of Energy and seven initial private sector anchor partners. The partnership with the European Commission and European Investment Bank aims to mobilise investments to build large-scale, commercial demonstration projects for clean technologies across Europe, and will invest in a portfolio of high-impact EU-based projects.
“Europe is fantastic in its commitment to avoid a climate disaster: not just to reduce its own emissions, but to support innovative work that can allow the entire world to get to zero,” he pointed out.
Partnering with alternative actors to achieve green goals
The panel discussion that followed delved into the idea of the need to reach out to bottom-up platforms, fin-techs and foundations, as a complement to traditional financial institutions, to raise impact finance.
“We have to embrace the financial revolution that is happening on the frontier of Fintech and cooperative organisations,” said Joseph Chandler, CEO and Executive Creative Director of Abundance Holdings. “There are going to be more and more forms of market pressure for banks to adapt and adopt, acquire and invest in some of these start-ups. The banks need to innovate or they are going to lose a significant amount of business,” he explained.
For Bernard Bayot, Managing Director of Financité and President of the Belgian cooperative bank NewB, there is a huge difference between traditional banks and cooperative ones when speaking of environmental objectives. “The clients of cooperative banks are not only clients, but also players. They own and control the bank so the manager of the bank cannot do what he wants, he has to reach the social and environmental objectives set,” he explained.
The 900 community foundations in Europe can also play an important role. “Philanthropic organisations have their own private resources, they are politically independent; contrary to public donors, they can take risks and invest in initiatives where social rather than financial profit is the goal,” indicated the Secretary General of Assifero and chair of the Dafne-Donors and Foundations Networks board in Europe, Carola Carazzone.
The challenge of scaling up
On his side, European Investment Fund Deputy Chief Executive Roger Havenith agreed that there is a lot to learn from start-ups and fin-techs, with whom they are partnering up with, but argued that there is still space for traditional big financial institutions. “It is very important to have institutions like the European Union behind to create common standards” and define how investment is operationalized, he highlighted.
Bayot and Carazzone emphasised the important role national and European authorities play in giving incentives to stimulate sustainable investment and to generate an environment conducive to making higher risk investments in environmental objectives, as well as putting the green transition at the centre of new regulation.
In addition to mobilising new ways of finance, the other big challenge is building the capacity to scale up. Deputy Chief Executive of the European Investment Fund said, “Europe must do more to ensure there is a continuum in the funding chain.” “We are doing better in the early stage, it has improved with startups, but when it comes to growth of successful companies we have an issue,” he acknowledged. “We need to see how with public-private partnerships we can mobilise investment and we can rise it,” concluded Havenith.