Impact Investing in the Energy Sector: How Federal Action Can Galvanize Private Support for Energy Innovation and Deployment

Publication date: 
October, 2014

Building on a series of events around energy financing and impact investing that have taken place in Washington D.C. over the past six months, this paper addresses the opportunity for investment in the energy sector, the problems associated with making these investments and the resources needed in conjunction with the federal government. It holds that the federal government should take specific actions to catalyze impact investment in energy innovation and deployment, and to provide strategic coordination among a diverse set of impact-interested capital providers.

The report's Executive Summary is reproduced here:

Opportunity:

  • Overwhelming social and economic imperatives exist, both nationally and globally, for investment in the energy sector.
  • Investable capital from the philanthropy and family office community is underused in the energy sector, despite significant and growing interest.
  • Recent events hosted by the federal government serve as a stimulus for high-level action.
  • Federal government resources could be valuable for impact investors.

Problem:

  • Information asymmetries have prevented many types of asset owners from participating in the energy sector.
  • Philanthropic investment in energy innovation and deployment has fallen short, both in absolute terms and in strategic orientation.
  • High-profile failures in cleantech venture capital and government grants and loans have stigmatized energy solutions for mainstream investors.
  • Policy and capital markets are the only interventions large enough to mitigate climate change on a reasonable time horizon, but activities are not currently coordinated.

Resources needed by impact investors that may be coordinated with the federal government:

  • Information exchange platform(s).
  • Research on policies conducive to the work and dissemination of reports.
  • Intermediary organizations: strengthened and coordinated with private investors, as well as public-private partnerships.

Recommendations:

  • Support a national task force led by the private sector to coordinate action, propose public-private partnership opportunities, and surface relevant policy issues.
  • Offer grant funding for private intermediary efforts.