The Investment Gap that Threatens the Planet
Most renewable energy projects today face very high hurdles. For example, requiring long development timelines, demanding capital-intensive testing that may yield negative results, or exist in subsectors that have delivered low financial returns over the past decade.
Funding for these projects was acquired through Venture Capital in the past (VC.) They have been the most effective funding vehicle for high-risk ventures. VC has helped finance 43% of public companies since 1979, however, due to not meeting desired returns in recent years the venture industry no longer seems interested in maintaining a portfolio of investments in climate mitigation. The pooled return for all clean-tech-related venture investments between January of 2000 and Q1 of 2017 was only 4.1%, far lower than the market average.
As a result, funding for clean energy has fallen to just 2 percent of all VC investments, the lowest level since 2005 (Based on data provided by Cambridge Associates LLC Private Investments Database.) This absence creates a need for new financing mechanisms that better align with the development of climate solutions that will secure a low-carbon future.
These proposed financial mechanisms need to complement our existing financial system as well as suited to long development timelines, be able to build for-profit companies, tolerate high risk across a variety of dimensions, expect low financial returns but high social-impact returns and have big dollars to put to work. This is why Naveco Power is currently working towards a financing mechanism that suits these needs, in the form of a Community Economic Development Corporation (CEDC.)
Simply put a CEDC is a pool of money raised by selling shares which is then used towards a project that creates a measurable financial return. CEDC shares offer many benefits including semi-annual dividends, tax benefits, and the knowledge that your investment is directly impacting your local community.
With the understanding that investments like this are needed to address climate change at scale, Naveco is well equipped to develop renewable projects for years to come.
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Source: Burger, S. P., Murray, F., Kearney, S., & Ma, L. (2018, January). The Investment Gap That Threatens the Planet. Standford Social Innovation Review, 16(1), 28-35.