Financing first-of-a-kind climate assets

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Dec 21, 2023

This podcast explores the challenges of financing first-of-a-kind climate projects and discusses solutions such as off-balance sheet financing, structured finance, catalytic capital, and government programs. It also highlights examples of companies that have successfully solved the financing problem. The episode discusses the need for code switching between venture capitalists and infrastructure financiers, as well as David's checklist for first-of-a-kind entrepreneurs. The chapter descriptions include insights on clean energy tax credits, the role of catalytic capital and strategics, project finance expertise, creative financing models, and the journey towards building a mature asset class.

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INSIGHT

Importance of FOAK Projects

First-of-a-kind (FOAK) projects are crucial for deploying climate solutions at scale.
They represent a critical step towards achieving gigaton-scale carbon abatement.

INSIGHT

FOAK Financing Challenges

FOAK projects fall at the intersection of venture capital and infrastructure finance, two asset classes with differing risk tolerances.
Venture capital is too expensive, while infrastructure finance is too risk-averse for FOAK.

ANECDOTE

Innovative Geothermal

David Yeh shared an anecdote about a geothermal company.
Traditional infrastructure investors often reject projects described with terms like "disruptive" or "innovative".

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There’s a hole in the finance world. Fighting climate change means scaling up lots of new technologies, but financing those first-of-a-kind (FOAK) projects is incredibly difficult. New technologies involving things like sustainable aviation fuel, geothermal, and direct air capture can take a decade or more to scale up. But venture capital is too expensive for FOAK projects, while infrastructure finance is too risk-averse.

So what solutions could solve the FOAK financing problem?

In this episode, Shayle talks to longtime climatetech investor David Yeh. David has spent over 20 years in climatetech, including in roles at the Obama White House, Generation Investment Management, and the World Bank.

They cover topics like:

Different approaches to FOAK, like off-balance sheet, structured finance, catalytic capital, and government programs.
Examples of companies that solved the FOAK problem
Code switching between venture capitalists and infrastructure financiers. (Try using the word “innovative” with traditional bankers).
David’s checklist for FOAK entrepreneurs.

Recommended Resources:

Bloomberg: Grant From Bill Gates-led Fund Will Make Green Jet Fuel As Cheap As Fossil Fuels
CTVC: What the FOAK?

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