Financial Innovation for Greentech (e.g. Solar)

Innovative Financial Framework for Greentech

  • New technologies are developed at breakneck speed.
  • Often, cutting edge technologies offer a huge financial benefit in terms of very high ROI resulting in a payoff / breakeven of initial capital investment in 2-7 years. Once breakeven point is reached it is pure profit because often these green technologies require very little ongoing maintenance or fuel compared to the existing old non-green technologies that they hope to replace.
  • Here are some examples : 1) Computer Systems and Workflows for Paperless office, 2) Solar power, 3) Wind power, 4) Electric Vehicles.
  • However, adoption remains much slower than speed of research and development.
  • The main reasons for slow adoption are: 1) Lack of awareness among general (non-technical users) about clear financial profitability of greentech / cleantech investment, 2) Lack of understanding in market of how workflows should adapt with the radical new technology, 3) Upfront investment that is often larger than paying maintenance and fuel on existing non-green assets.
  • Technologically savvy professionals with domain knowledge have an excellent understanding of all these issues and even strong confidence to bet their own money on the transition. Whereas a non-technical average user would sacrifice a clear cashflow for years and stay on old expensive non-green technology due to lack of confidence.
  • With the current capitalistic system, one cannot expect all people to take financial risks to help the environment. But, one way to leverage capitalism is to create innovative financial instruments to boost the effort.
  • A proven way to add financial fuel to fire is debt leveraged securitization. It was due to this kind of instruments that mortgage loan market went from being flat for years to exponential growth for over 5 years until 2008. Even now CDO and other securitized debt instruments are a huge part of financial markets.
  • Here the model that would work is to offer non-technical users a fixed cost and low risk option to use greentech where they would still save money without upfront capital investment. And the remainder cashflow above the fixed benefit passed to the user can be debt leveraged and securitized to offer an outstanding return to investors.
  • Solar power can be the first domain to study. But, we should keep the framework general enough to be applied to other such greentech.
  • You have an opportunity to understand a huge amount of cutting edge financial innovation and apply it to create something novel to spread Greentech like wildfire! And it can be a very profitable new business while helping the planet!