Getting Started: 4 Key Pillars of a Green Infrastructure Fund

A tidal wave of sustainable infrastructure capital is on its way.

Already, momentum is building: In the first half of this year, public and private investment in U.S. clean energy hit a record-setting $147 billion, largely thanks to the Inflation Reduction Act (IRA). Yet far more investment is needed to achieve the country's climate goals and reach net-zero greenhouse gas emissions by 2050. With innovative funding initiatives and government programs like the $27-billion Greenhouse Gas Reduction Fund (GGRF) set to infuse even more public dollars into the U.S. market, catalyzing even more private investment, that money is coming — fast. 

To successfully ride this wave, lenders must build operational readiness today. Funds that develop the streamlined frameworks, standards, and systems necessary to quickly and responsibly deploy capital will see strong returns on their investments, maximum impact, and lower risk. Those who fail to invest in their operations will struggle to stay afloat, as the sustainable infrastructure market’s rapid scale-up threatens to drown financiers in a sea of paperwork and poorly managed data.

Here are four areas where funds can level up their operations, taken from Banyan Infrastructure’s guide to operational best practices:

Governance

Funds with sound governance empower their teams to effectively allocate resources and manage workflows with precision and clarity. To lay the foundation for your fund’s success, consider the mission your investments seek to achieve. From there, identifying key roles on the executive leadership team and forming stakeholder committees help to put the structure in place to support that mission. Once this framework is established, developing explicit oversight mechanisms, decision-making processes, and conflict-of-interest policies will contribute to the fair, transparent, and consistent governance of investment dollars, helping to bolster investor confidence and ensure a fund’s long-term success.

Banyan Infrastructure’s guide offers insights and recommendations on how to build these governance structures from the ground up, establish clear processes and policies, and select the appropriate staffing and operational resources to set your fund up for success.

Standardizing the investment process

In the past, project finance deals were like snowflakes — no two were alike. However, the scale and volume of today’s project finance industry no longer allow for this kind of individuality across deals. Particularly as more public money enters the market, project financiers must find ways to standardize their investment process from origination to close, ensuring consistency and streamlining operations to more efficiently deploy capital. This means clearly outlining for all stakeholders and potential investees the types of investment available and procedures around initial screening and due diligence, decision-making criteria, and expected timelines. 

Technology, too, can play a role in standardizing the investment process: Digital infrastructure is a critical component of any 21st-century fund’s operations. While most funds use at least one software solution today, there is an opportunity to leverage intelligence software in the buildout of operational workflows, saving financiers valuable time and money that can be directed toward more strategic work.

Banyan Infrastructure’s operational readiness guide provides recommendations on how funds can develop these standards and the necessary framework to support them, as well as which digital tools to consider when building your operational workflows.

Portfolio management

Once a deal closes, portfolio management begins. At this stage, funds must clearly delegate various management duties, from forecasting, loan servicing, and risk monitoring to accounting and compliance monitoring. Successful portfolio management relies on collaboration between middle- and back-office teams to ensure information is accurate and any issues are surfaced early on. However, organizing and managing flows of information can be tedious and time-consuming. By establishing a clear division of work, funds eliminate confusion around who is responsible for which data, and once again, digital infrastructure can play a valuable role in fostering collaboration and improving accuracy across teams.

BanyanInfrastructure’s guide includes recommendations on how best to divvy up portfolio management tasks, how frequently to review information related to finances, transactions, and portfolios, and best practices for centralizing information for transparent, easy access.

Stakeholder reporting

Particularly for organizations leveraging public funds, stakeholder reporting is a complex but critical piece of the project finance puzzle. Weekly, monthly, quarterly, and annual reporting allows funds to deliver timely, high-quality information on project and portfolio performance to a range of stakeholders, both internal and external, as well as ad hoc updates. Internal reporting may include updates on the fund’s deal pipeline, liquidity forecast, portfolio activity, and financial management. Meanwhile, reports on project and portfolio performance, impact, and cash flows can provide external stakeholders with the information they require for funds to remain in compliance and prove the benefit of their investments. 

For especially complex public funding programs, such as the GGRF, reporting can be an onerous task if done manually: The EPA estimates GGRF reporting alone will come with overhead costs anywhere from $1.6 million to $10.8 million a year, while several recipients believe the cost is even greater. For funds to successfully manage this requirement, there is only one feasible solution: technology. Tools like Banyan Infrastructure’s one-click GGRF reporting can help financiers quickly and accurately pull the data needed to comply without breaking the bank or placing a heavy burden on workers to manually complete this task.

Building digital infrastructure for 21st-century project finance

While Banyan Infrastructure’s operational readiness guide lays out a clear roadmap for investment funds, none of it is possible without the accompanying digital tools required to securely collect, organize, store, and analyze data. For 21st-century investment funds to meet the massive scale of the energy transition, financiers must embrace the power of software to streamline, standardize, and scale their operations. The origination process is a tedious mess of documents without accessible, organized data management. Portfolio management can be a painstaking, number-crunching exercise — and even a barrier to employee retention — for funds that don’t rely on digital automation to improve the processes and reporting. Accurate, timely compliance and obligation management, namely for public funds, is all but impossible without a powerful digital data-gathering solution to gather, collate, and synthesize the required information. 

Banyan Infrastructure’s operational readiness guidance offers insight into the specific processes and workflows where funds can benefit from digital tools, as well as recommended tech stacks to help both new and established funds prepare their operations for growth. These software-as-a-service (SaaS) products can help a fund’s information workers with key duties, such as: 

• Office productivity (e.g., Microsoft Office, Google Suite)
• Customer relationship management (e.g., Salesforce, HubSpot, Zoho)
• File management and sharing (e.g., Box, Sharepoint)
• Accounting (e.g., Sage Intacct, NetSuite, Business Central, Quickbooks)
• DER management (e.g., Also Energy, Solaredge, EnPhase)
• Access to valuable databases (e.g., Snowflake)
• Project Finance Platform (e.g., Banyan Infrastructure) 

With a range of software products supporting this work, financiers can easily automate data-gathering on financial performance, impact, and other metrics. However, simply pouring your physical filing cabinet of origination documents, covenant tracking spreadsheets, annual portfolio reports, and more into digital data storage does not remove all barriers. 

By adding Banyan Infrastructure intelligence, funds can pull all of this digitized data into one central location and make sense of it. Automated data synthesis pulls key metrics from across a fund’s suite of digital tools into customized checklists and reports, while data analysis can help financiers glean valuable insights from the wealth of data collected and organized through Banyan Infrastructures’s purpose-built project finance platform. As the renewable energy and sustainable infrastructure markets continue to grow, this intelligence is crucial for streamlining operations and helping funds to scale effectively.

Are you a new fund just starting out? An established capital provider wading into the sustainable infrastructure market? A community lender seeking to leverage public funds for local impact? Get the guidance you need to build your operational readiness today by contacting Banyan Infrastructure today.