How Green Funds and Banks Can Overcome Their Capital Deployment Challenge

Billions of dollars of catalytic capital are available for sustainable infrastructure. For many green banks and funds today, lack of funding is no longer the main issue — it’s deploying their capital to the right projects quickly.

Timelines to get capital out the door can be long. Heather Braithwaite of the Collective Clean Energy Fund (CCEF) sees some applicants waiting up to 90 days to receive a response. “That is [a] serious… impediment to impact," she said. 

The green bank’s chief investment officer shared her experiences on a recent webinar alongside Stephen Morel, the CEO of the Montgomery County Green Bank (MCGB), and Banyan Infrastructure’s COO and co-founder Amanda Li. The hour-long panel discussion, titled “Digital Transformation Strategies for Renewable Energy Investors,” covered topics ranging from data standardization challenges to deployment bottlenecks and the role of technology in green banking, both today and into the future.

Green Infrastructure Financing is Facing Bottlenecks

When able to deploy capital efficiently and effectively, green banks and funds can catalyze private funding into clean energy and climate technologies by using public funding as a motivator to spur innovation and investment. 

However, managing the volume of projects that need investment is not always so easy, explained Amanda. Often, green banks and funds that work in C&I, community solar, or even residential are tasked with financing smaller projects — a modest community solar farm, for example — that require less capital but the same due diligence and paperwork as any large-scale investment.

“We’re looking at 100 times the amount of data to work through, 100 times the amount of covenants, APIs, performance metrics, reporting metrics, and compliance metrics to track,” Amanda explained. “Each of these projects still has contracts, counterparties, Excel files, and ongoing operational, financial, and compliance data tracking.”

Without properly managing that data, Amanda added, it becomes difficult for investors and lenders to have the confidence and visibility they need to invest in smaller-scale projects. And even if lenders do manage to compile and organize all of the necessary data in siloed systems, they still face challenges keeping up with the market: Existing workflows are often unable to scale in a way that empowers lenders to handle this growing volume.  

CCEF has experienced this firsthand. Since its inception in 2021, the organization has grown its $30-million capitalization into a $202.5-million portfolio. For Heather, this impressive scale-up has underscored the need for structure and intake systems to support the vast amounts of data that come with high volumes of sustainable infrastructure projects. 

“We really did hit a literal bottleneck, meaning we were having projects come in; we weren't able to transact them as efficiently as we would like to,” Heather explained. Additionally, public funds coming into the space — the Greenhouse Gas Reduction Fund, for example — could have time constraints placed on capital deployment that would require green lenders to responsibly and efficiently get money out the door, she added. 

“It's significant to be expected to deploy, you know, $100-plus million in one year, perhaps,” Heather said. “You're not looking at half-a-million-dollar projects anymore. You're looking at $5-million projects, $10-million projects, $20-million projects. That also means that you need a different type of underwriting to help with the level of sophistication needed. So we needed a system that could support large projects, large amounts of data, and to easily allow for our underwriters to integrate into that system…because we're not doing business as usual. This is a whole different world for us.”

Digital transformation strategies and project finance software can help

One way to address those challenges? Digital transformation—using software and technology to drive operational efficiencies and scale. 

Project financiers rely on multiple data sources to evaluate and track a single deal, let alone a portfolio of projects. These are often disjointed, shielding stakeholders from the full picture and requiring additional time and manual data entry to manage. 

This is where digital tools can help. It’s impossible to tokenize a piece of paper or use AI to organize your offline spreadsheet, Amanda pointed out. Effective data management and utilization of emerging technologies rely on upgrading the technology that’s already in use. 

Bringing project data online and into cloud-based systems provides stakeholders with more visibility and creates opportunities to streamline green lending operations. For financiers tasked with deploying more capital quickly — and, as a result, evaluating larger, more complex projects — this critical step empowers them to build the standards they need, both to bolster broader investor confidence and to create a healthy financial market.

Banyan Infrastructure’s software was designed to support this evolution. By addressing bottlenecks and creating a unified ecosystem — in which various data sources feed into one central location for all stakeholders — purpose-built platforms like Banyan Infrastructure can help lenders manage the complexity of sustainable infrastructure projects. Creating that “single source of truth throughout the lifecycle,” as Amanda described it, allows all project stakeholders to have confidence and clarity in the information they are receiving. 

The company also strives to develop connections and data sharing between “developers, independent engineers, lawyers, brokers, the broader capital stack, and the federal government” in support of greater standardization across the project finance industry, she added.

“They're all interfacing transactions that may be incredibly small and therefore have a lot of overhead into it, unless you manage that correctly," Amanda said. “Digitization and engaging with software help you reduce that bottleneck.”

Stephen echoed the need to use technology as an expediting force. MCGB aims to magnify its capabilities and scale up its operations, and digital tools have played a role in that effort. With more digitized data, green banks are empowered to direct more capital providers into sustainable infrastructure by giving potential financiers the peace of mind they need to embrace the space. For his part, Stephen noted that having case studies and data on competitor successes and failures has helped attract more capital to MCGB.

“We utilize that [data] specifically for our future borrowers, contractors, and the whole local ecosystem that we work with,” he explained. “It’s also particularly helpful to demonstrate to stakeholders and investors because you have the data to show loss rates that they’re not familiar with.”

“I don't think a lot of those investors know that green banking has such low default ratios out there,” said Stephen. “Having the data is just incredibly important right now to make that demonstration, bring those funds off the sidelines, and really have a standardized approach that all of the raters and all of the investment community institutional investors are familiar with because that's how we're going to end up continuing to grow liquidity in the sector.”

Modernized workflows can accelerate capital deployment

For all parties, technology plays a critical role in making project finance faster, simpler, and more efficient. Streamlining workflows with digital tools and more efficient processes lets green investors move projects through the pipeline faster and deploy larger amounts of capital more quickly. Meanwhile, standardized processes can attract more investors who have clear data to evaluate and can more easily compare projects. 

Many other areas of the financial sector have already embraced this digital transformation.

“As we think about the future of technology, we first have to catch up to where…any large commercial banks already are in their retail departments and where other industries have caught up to,” Amanda explained. “They are incredibly connected and have very live, visible data around risk, returns, and communication and audit across all of the key stakeholders, across all compliance and legal requirements.” 

For Stephen, the digital transformation has empowered MCGB to find more data-driven solutions. He expressed excitement about feeding data sets on underwriting, best practices, and more into systems that “can then interpret what new developers, what new borrowers, what new institutions are putting in, and be able to suggest what the best solutions are…then we can then leverage those to do faster activities, get to those underwriting answers faster, get to those deal closings faster, all because we'd be AI-supported.”

Building a deep well of data also allows MCGB to educate everyone from potential borrowers to contractors, stakeholders, and investors on the opportunities of the sustainable infrastructure market using what Stephen calls the “FOMO approach.”

“We really need to get people moving and have the rest of the market understand this is a place that they need to be as well. And so for us, having the type of case studies, the type of data that we can share with contractor communities of here's what your competition is doing and here's how they're successful just really has catalyzed more and more, and that's snowballed.”

“We really need to get people moving and have the rest of the market understand this is a place that they need to be as well. And so for us, having the type of case studies, the type of data that we can share with contractor communities of here's what your competition is doing and here's how they're successful just really has catalyzed more and more, and that's snowballed.”

If you want to learn more, reach out to see how Banyan Infrastructure can guide you in your digital transformation journey.