Close your eyes and think about innovation. How many of you thought about a widget – a robot, a self-driving vehicle, a sensor? I’m guessing almost all of you. How many of you thought about regulations, contracts and financing? Maybe a few at most. This is the exercise that former Secretary of Energy, Ernest Moniz, and David Cash, former Massachusetts Department of Environmental Protection Commissioner, prompted at the launch of the WBUR Environmental Reporting Initiative.
The point of this exercise was to underscore that successful hardware innovation is reliant on a wider system. It cannot be done in a vacuum. As Environmental Defense Fund (EDF) and others embark on the Fourth Wave of environmental advocacy with a focus on leveraging new technology to drive environmental outcomes, integrating technologies into this wider system of regulations, networks and capital will be critical to achieving our goals. Our Sustainable Finance Team will help ensure the full power of investors is brought to bear in taking these critical technologies to scale.
Although this was an “aha” moment for many in the audience, not so much for us who lead the Sustainable Finance strategy. We surveyed the landscape to understand the barriers to not only scaling innovation, but also for attracting mainstream capital toward our goals such as turning the corner on the climate emissions. It quickly became clear that capital availability was not the only problem. Instead, it was the enabling environment – regulations, tools and yes, capital — that mobilizes not because of good intentions, but because of the attraction of risk-adjusted returns.
Technology innovation and Fourth Wave Environmentalism are a huge opportunity for investors. Here are three ways they can accelerate, and profit from, this trend:
- Get the rules right – Be like the 25 oil and gas investors representing $500B of assets under management who spoke up in favor of strong federal methane legislation because it was a key way to mitigate risk in their portfolio.
- Make it easy – Be like Credit Suisse and work with us on tools like the recently released Sustainable Fisheries Risk Assessment Tool to make it easy for investors to generate risk-adjusted returns from these emerging asset classes.
- Realize returns – Be like Althelia, Carlyle, Encourage, KKR, Oak Hill Capital Partners and Quantified Ventures and partner with us to take advantage of our science and technical expertise to identify and articulate the environmental returns that drive financial returns and, most importantly, deliver both the financial and environmental returns to your investors.
In summary, finance is as much a part of innovation as technology is, and as hardware changes so must finance. As innovations in sustainable finance gain steam, we’ll be reporting on new solutions at the intersection of finance and the environment.
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