A FASTER ROUTE?

The Smart Money S.A.: A Green Bank could be the right nudge toward clean energy investment.

Let’s posit for a moment that we want renewable energy, but the technology does not exist to make a fast, substantial shift financially viable in 2021.

Let’s further posit that we’re looking for a financial mechanism for encouraging the renewables shift faster rather than slower, and bigger rather than smaller.

Maybe we need a Green Bank? No, don’t feel bad — I hadn’t heard of it until recently, either. This is a thing that exists in Australia. It briefly existed in the

U.K. It is being used in smaller forms in Michigan, Connecticut and New York.

As a concept, I like it better than other financial tools.

The context in which I like the Green Bank is twofold: First, as the Biden administration tries to give shape to a big infrastructure bill and weighs different levers to accelerate a move to renewables. Second, as compared to other levers.

I recently wrote that ESG investing isn’t my preferred nudge.

ESG, or environmental, social and governance investing, is too diffuse. I see it delivering marketing hype but questionable benefit for transitioning to renewables at a large scale.

Mutual fund ESG investing is also typically negative, in the sense that it encourages divestiture from legacy fossil-fuel companies — the ExxonMobils, the BPs, the pipeline companies. It generally seeks change by removing capital. But it can’t necessarily accomplish the positive role of providing capital to innovative renewable energy companies.

Another problem with divestiture from the legacy oil and gas companies is that the oil majors represent the largest potential private investors in renewable energy. They have deep expertise, technology and logistical prowess in delivering energy from sources to users. We could remain skeptical of BP’s net-zero carbon by 2050 pledge or Exxon’s recent inclusion of up to three climate activists on its board. But we could also allow for the fact that the oil majors’ move toward renewables could and would be a great privatesector boon to the climate fight.

On the private-market side, the most appealing approach to me would be for innovative, climate-friendly energy companies to find a way to accelerate the transition in a profitable way. No doubt many private equity firms and venture capitalists are attempting this right now.

A Green Bank, at its best, is a public-sector, or quasi-public, financial nudge to accelerate and expand this kind of private-sector investment. To the extent a Green Bank can provide scale and speed to a private-equity market, it is a much more appeal