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Jun 10, 2024
Industry Insights

Change the trajectory of the climate crisis by transforming financial structures

In the early 20th century, Ford revolutionized the automobile industry by implementing standardization across production lines. Through production efficiency, automobiles became cheaper and widely accessible. A similar strategy has been deployed effectively across countless industries – consumer products, infrastructure, agriculture.

Today, the climate crisis would benefit greatly from a similar approach towards climate finance. 

At present, climate finance is largely driven by customized, highly structured project finance transactions. These types of financing structures are unique to one another and require nuance, thoughtful problem-solving, and take months and teams of experts to pull together. These deals tend to lean larger to generate an acceptable return on investment (ROI) for stakeholders. Many professionals in the space cite the individuality of each transaction, favoring complex and bespoke solutions. 

At a time when the technologies of distributed clean energy are relatively inexpensive and can materially augment, if not displace, the legacy grid system, there is an undeniable opportunity to change the trajectory of the climate crisis by transforming our approach to its financial structures.

Policymakers and stakeholders of the greenhouse gas reduction funds (GGRF) have a unique opportunity to quickly mobilize the world’s financial markets to reduce emissions. There is no doubt that these funds will have a positive climate impact regardless of how they are deployed, but the optimization of that impact is what is at stake. 

Greater product standardization across the market would maximize the leverage of available capital and make distributed clean energy technologies more accessible for more people. Standardizing financial structures across originators, for example, would create clear points of entry/exit for more banks, credit unions, insurance companies and institutional buyers, and would create scalable partnerships between technology, private and public lenders to appropriately address risk and reward. It would replace the inefficiencies of bespoke transactions with speed and scalability. The size of the market would increase and global emissions would drop. Of course, standardization won’t work across all asset types and there will always be a significant place for bespoke and custom transactions. Additionally, standardization when and where possible is required to sufficiently meet the global investment requirement of $50T.

Policymakers have a unique ability to force these changes as more financial institutions seek to participate in GGRF. The key to effectively meeting the climate crisis is a collective, fast response, which can only be realized if the gatekeepers of capital start to favor scale over customization. Climate finance has a Model T opportunity.

That's why Atmos Financial was founded to confront this challenge by offering our products to any and all lenders seeking to engage in the clean economy. Interested in learning more about our lending solutions? You can email us at hello@joinatmos.com to learn more.

Start your climate journey today - apply for an Atmos account in just 2 minutes.

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