News & Resources

Capital Markets and the Energy Transition

Mark Hannigan

2020 has been an unprecedented year in so many respects and the combined effects of the COVID pandemic, Big Oil (Energy) committing to net zero and the US election have all played their part in accelerating the transition to a sustainable energy economy.

Additionally, an increased importance now being placed on climate focused ESG by institutional investors has finally brought Cleantech and Climatetech into the mainstream. One would think that capital allocators being given this renewed would be a boon for Cleantech and Energytech entrepreneurs. Not so, I’m afraid. Let me explain why…

Many of the traditional capital markets which invest in energy technologies are simply not able to deploy growth capital into such ventures at seed and Series-A stages where commercialization and scaling are the vital next steps on the journey to mainstream adoption. 

For energy focused private equity funds, a $5m Series-A commitment is almost always “too small and too early” and for tech focused VCs, energy transition technologies often lack the software as a service (Saas) component that they love so much. This disconnect is leading some ventures to resort to unorthodox sources such as crowd funding platforms – a method more familiar to the independent movie industry than complex world changing industrial technologies.  

All of this means that a parallel transition is now urgently required in energy capital markets to support the transition that is now underway in the operational arena. Put simply, the admirable next zero commitments made by governments and Big Oil (Energy) in recent months cannot happen without urgent commercialization of technologies supporting vehicle electrification, carbon capture, utilization & storage (CCUS), hydrogen fuel cells and remote automation and sensing. 

If recent history has taught us anything, it is that no sector is immune from the disruptive forces of technology innovation and this lesson extends to energy investment. It’s time for investors to play catch up and proactively evolve their busines models before a growing number of disruptive fintech innovators do so for them!

Stay tuned here on the Greenbackers site to learn more about how we help Cleantech and Circulartech entrepreneurs access capital and achieve technology adoption.

Mark Hannigan is the North American Partner at Greenbackers.

17 November 2020