In clean energy financing, there is a 'valley of death' where innovative companies landing projects with climate change solutions can't connect to institutional investors, who have pools of capital but are unsure of where to invest.
A new platform, Aligned Intermediary (AI), aims to change that by finding suitable, risk-adjusted clean energy investments for long-term institutional investors. So far, five institutional investors – the University of California , the New Zealand Superannuation Fund , the Alaska Permanent Fund , TIAA-CREF and family office Tamarisc – have committed $1.2 billion through the intermediary.
AI is a project developed by the non-profit Prime Coalition which sources foundations to support early-stage companies and projects to reduce greenhouse gases.
Sister publication Low Carbon Energy Investor spoke to Peter Davidson, AI's chief executive and a former executive director for the Department of Energy's Loan Programmes Office, to learn more about its role connecting small clean energy companies and projects with institutional investors.
Q: What role is AI looking to play in the world of clean energy financing?
PD: There are very interesting companies and projects out there, some that currently are, and others that we believe will be, highly profitable, that are real pioneers and leaders in their industries, and these companies need capital.
I really look for us to be that matchmaker between those very exciting companies and projects and the great pools of capital in the long-term, multi generational sources of capital like pension funds, endowments, sovereigns, insurance companies and family offices.
Q: Why did a group of institutional investors commit $1.2 billion so quickly to AI
PD: We believe that clean energy, clean water and clean waste are the growth industries for the next 20 years.
Today, onshore wind and solar are very vibrant industries. The onshore wind industry is vibrant throughout the world and offshore wind is playing a role in Europe. Biofuels, the distribution grid, desalinisation, other forms of low carbon production such as carbon-capture utilisation and sequestration, the nuclear industry – these are all industries where we believe there may be investment opportunities.
Q: Will AI connect investors to infrastructure assets as well as to companies?
PD: Yes, transmission assets and grid assets are very important. Water transmission assets, electricity transmission assets, pipeline assets. AI's focus in not just renewable energy, it is low carbon, so carbon-and-capture and sequestration as a way to deal with the carbon that now goes through our fossil fuel systems and will most likely continue to over the next 50 years.
Q: Has it been difficult to set up AI's structure? How will it work?
PD: We believe we really have the opportunity here to help catalyse the flow of billions of dollars into the low carbon energy, waste and water sectors. It's absolutely crucial that we do it correctly. So we're going to take our time and make sure we do everything correctly, have it set up correctly from a governance perspective, from an investment criteria perspective, from a staffing perspective.
Q: What are Aligned Intermediary's prospects for the near future?
PD: I think we are an initiative that is coming together at the right time and with the backing of the right partners, the long-term institutional pools of capital that have come to us to find a more efficient way to deploy their capital into these high-growth industries.
We are seeing strong response from our current long-term investors and other long-term investors that are interested in joining us and I'm very excited that we can be part of bringing capital to the really exciting companies and projects that I know are out there.