Modern infrastructure investment is unsustainable. The need for change is immediate, and the growing economic case for green infrastructure projects is certainly accelerating the appetite for corporate investment.
Banyan Infrastructure is a purpose built project finance platform designed to simplify, accelerate and optimise the financing of sustainable infrastructure. Headquartered in San Francisco, the investment facilitator recently confirmed a $8.2million Series A round led by VoLo Earth Ventures with additional investment from Ulu Ventures, Vista Verde Capital, Nomadic Venture Partners and Industrious Ventures.
Since its inception, Banyan has helped to deploy and manage over $1billion of capital towards sustainable infrastructure developments. However, set against the backdrop of rising climate concerns, as well as a more concerted global effort by major institutions and nation states to address environmental challenges, the demand for such projects continues to rise.
Here, Amanda Li, co-founder and COO of Banyan, explains the role of fintech in financing sustainable infrastructure.
Building for change
It’s widely reported that carbon heavy sectors, such as the built world, need to work harder than others to address the pressing challenge of climate change. This pressure creates enormous opportunity for innovation and in fintech, we now also have an important role in the battle to fight the climate emergency.
Currently, the Organisation for Economic Co-operation and Development (OECD) estimates that 60 per cent of global emissions are from infrastructure. As such, it’s clear that future developments will have a huge impact on our ability to meet the 2050 Net Zero targets agreed to in the Paris Agreement.
Furthermore, research by McKinsey has shown that for the world to achieve net-zero emissions in 2050, $3.5trillion more would need to be invested into low-emissions capital stock each year than it is now.
The need for change is immediate, and the growing economic case for green infrastructure projects is certainly accelerating the appetite for corporate investment. Fossil fuel-based energy has become less appealing due to factors such as policies that favour green, volatile markets and even geopolitical events – whereas green alternatives, such as solar energy, are becoming more highly sought-after. To be in a position to truly take advantage of these trends, we must first create capacity to accelerate investment into this market.
Today, investing in sustainable infrastructure projects remains a largely manual and inefficient set of processes, with limited standards technology to leverage. Despite the advances in availability of asset and financial data, many companies are slow to deploy investment for these projects with the same out-dated techniques used for the past many decades. Moreover, while sustainable infrastructure projects have broadly become smaller, cheaper, and more numerous, the complexity of infrastructure lending has hardly changed.
Risk assessment
Now, with the world poised for an economic downturn, there is an added layer of complexity for businesses to navigate. Although the interest to invest in sustainable infrastructure remains strong, there is a natural increase in risk assessment for investment decisions and without access to the full scope of data required to make an informed decision, businesses may well be less likely to invest at needed scale or speed.
Furthermore, where the process remains cumbersome and complicated, businesses stand to lose out on financial advantages that could have been gained. The World Economic Forum identified new sustainable buildings as a $24.7trillion investment opportunity by 2030, in emerging markets alone
An avoidable disaster
A slowdown in sustainable infrastructure investment at this point would be detrimental to the targets set for net-zero emissions. Ultimately, it could well end up being a fatal blow to the global community’s pursuit of broader environmental goals, including the IPCC’s universally heralded 1.5°C target. If this were to happen, the worst effects of climate change would become largely unavoidable, which would ultimately cost lives.
So, the question becomes how can we use fintech to improve the process for investing into sustainable infrastructure projects? Well, at Banyan Infrastructure, we have a few ideas that we hope will help. In fact, since our inception in 2018, we’ve already helped to deploy and manage over $1billion of capital towards sustainable infrastructure developments, including solar, energy efficiency, energy storage and more. Now, our attention is focused on going even further, and faster.
Understanding what’s needed
As a business, we want to help to facilitate more sustainable infrastructure projects around the world. However, we understand that the long-standing complexities of the process often make this difficult. As previously mentioned, investment in sustainable infrastructure is still largely dictated by a manual and inefficient set of processes which provides little flexibility or transparency to those on the other side of it.
The financial sector would massively benefit from new, technology-driven solutions, which make the sustainable investment process more straightforward. Similarly, it’s important these solutions are accessible, intuitive and fully transparent – which in turn significantly helps to inform decisions around risk.
Banyan: the sustainable choice
We created Banyan Infrastructure to facilitate transparency and increase accessibility. Our innovative, technology-led system provides dynamic online checklists and scorecards, approval-based workflow automation, a centralised data vault sync and a self-service client portal to help streamline the sustainable infrastructure investment process. All in all, our platform has been purpose-built to meet the modern demands of project finance and sustainable infrastructure teams.
With our solution, major sustainable infrastructure projects can benefit from automated contractual compliance. The innovations in technology have allowed our platform to help to provide loans originated at a higher velocity, serviced at a lower cost, and syndicated with greater liquidity. As such, fintech is now helping to both simplify, and optimise the mechanisms needed to continue financing the switch to green infrastructure.
Adaptation and evolution
The world increasingly needs more suitable financial tools, which enable project financiers, who traditionally take less technical risks on more mature technologies, to get comfortable with exploring and entering new markets.
Increasing efficiencies in areas like solar and energy efficiency while freeing up funding capacity will allow investors to allocate more time towards exploring new areas like green hydrogen and carbon capture. If this were to happen, the infrastructure industry could finally begin to make good on its promises of cutting carbon emissions, which would benefit us all. Another example of fintech helping to change the world for the better.
