Banyan: Modern infrastructure investment is unsustainable
We all have an important role in the battle to fight climate change. However, certain carbon heavy sectors, such as the built world will need to work harder than others to address the pressing challenge - this also creates the area for enormous opportunity. Currently, the Organisation for Economic Co-operation and Development (OECD) estimates that 60% of global emissions are from infrastructure. As such, it’s clear that future developments will have a huge impact on our ability to meet the 2050 Net Zero targets agreed to in the Paris Agreement. Furthermore, research by McKinsey has shown that in order for the world to achieve net-zero emissions in 2050, $3.5 trillion more would need to be invested into low-emissions capital stock each year than it is now.
Building for change
The need for change is immediate, and the growing economic case for green infrastructure projects is certainly accelerating the appetite for corporate investment. Fossil fuel-based energy has become less appealing due to factors such as geopolitical events, policies that favour green, and volatile markets - whereas green alternatives, such as solar energy, are becoming more highly sought after. However, to take advantage of these trends, we must first create capacity to accelerate investment into this market.
Today, investing in sustainable infrastructure projects remains a largely manual and inefficient set of processes, with limited standards technology to leverage. Despite the advances in availability of asset and financial data, many companies are slow to deploy investment for these projects with the same out-dated techniques used for the past many decades. Moreover, while sustainable infrastructure projects have broadly become smaller, cheaper, and more numerous, the complexity of infrastructure lending has hardly changed.
Now, with the world poised for an economic downturn, there is an added layer of complexity for businesses to navigate. Although the interest to invest in sustainable infrastructure remains strong, there is a natural increase in risk assessment for investment decisions and without access to the full scope of data required to make an informed decision, businesses may well be less likely to invest at needed scale or speed. Furthermore, where the process remains cumbersome and complicated, businesses stand to lose out on financial advantages that could have been gained. The World Economic Forum identified new sustainable buildings as a $24.7 trillion investment opportunity by 2030, in emerging markets alone.
Slowdown in sustainable infrastructure detrimental
A slowdown in sustainable infrastructure investment at this point would be detrimental to the targets set for net-zero emissions. Ultimately, it could well end up being a fatal blow to the global community’s pursuit of broader environmental goals, including the The Intergovernmental Panel on Climate Change (IPCC’s) universally heralded 1.5°C target. If this were to happen, the worst effects of climate change would become largely unavoidable, which would ultimately cost lives.
So, the question becomes how do we improve the process for investing into sustainable infrastructure projects? Well, at Banyan Infrastructure, we have a few ideas that might just help. In fact, since our inception in 2018, we’ve already helped to deploy and manage over USD $1bn of capital towards sustainable infrastructure developments, including solar, energy efficiency, energy storage and more. Now, our attention is focussed on going even further, and faster.
As a business, we want to help to facilitate more sustainable infrastructure projects around the world. However, we understand that the long-standing complexities of the process often make this difficult. As previously mentioned, investment in sustainable infrastructure is still largely dictated by a manual and inefficient set of processes which provides little flexibility or transparency to those on the other side of it.
Therefore, the sector would massively benefit from new, technology-driven solutions, which make the sustainable investment process more straightforward. Similarly, it’s important these solutions are accessible, intuitive and fully transparent - which in turn significantly helps to inform decisions around risk.
We created Banyan to facilitate transparency and increase accessibility. Our technology-led system provides dynamic online checklists and scorecards, approval-based workflow automation, a centralised data vault sync and a self-service client portal to help streamline the sustainable infrastructure investment process. All in all, our platform has been purpose-built to meet the modern demands of project finance and sustainable infrastructure teams.
With our solution, major sustainable infrastructure projects can benefit from automated contractual compliance. The innovations in technology have allowed our platform to help to provide loans originated at a higher velocity, serviced at a lower cost, and syndicated with greater liquidity. As such, the system is helping to both simplify, and optimise the mechanisms needed to continue financing the switch to green infrastructure.
The world increasingly needs tools like Banyan, which enable project financiers, who traditionally take less technical risks on more mature technologies, to get comfortable with exploring and entering new markets. Increasing efficiencies in areas like solar and energy efficiency while freeing up funding capacity will allow investors to allocate more time towards exploring new areas like green hydrogen and carbon capture. If this were to happen, the infrastructure industry could finally begin to make good on its promises of cutting carbon emissions, which would benefit us all.
Amanda Li is COO, Co-Founder at Banyan Infrastructure
Banyan Infrastructure is a purpose built project finance platform designed to simplify, accelerate, and optimise the financing of sustainable infrastructure across the full life cycle.