Green Finance Institute Denmark’s Post

From First-of-a-Kind to First-of-Many At a time when ESG means energy, security and growth, it is a strategic imperative for the Nordics and Europe that we invest in the green growth drivers of tomorrow.  On Tuesday, GFI Denmark hosted a workshop on how to finance First of a Kind (FOAK) projects in the Nordics, where capital providers from across the capital stack shared their perspectives on what is needed for them to fund the scaling and commercialization of clean technologies. The scale finance gap in the Nordics is conservatively estimated at approx. €10 billion and scaling these crucial technologies is as much an independence, resilience and growth priority as it is a climate necessity. This is a complex challenge, but the workshop left us with many clear messages, including: 1. Go deploy  90% of the technologies needed are already there - but the capital needed to scale them is missing in the Nordics. Currently, 90% of green investments are within solar and wind - we need investments in the technologies of the future, i.e. flexibility solutions, alternative proteins, green hydrogen, etc. 2. The how-to inspiration is there Past examples such as the Finish Climate fund, and current examples such as TIBI, WIN, Scale-up funds and the EU-catalyst partnership are inspirational scale finance funds we can learn from in the Nordics. 3. Perceived risk often exceeds actual risk The best FOAK financing journeys have involved clear communication and transparency between financiers and entrepreneurs (as well as clear policy signals, conducive regulation and much more, granted). The better we understand each other the better we can adequately assess the risk and find appropriate derisking mechanisms. Key take away = we all need to talk! 4. Name the risk and name the mitigator FOAKs have market risk, construction risk, technology risk, project-on-project risk etc. and the best use of concessional finance can come in the form of advance demand aggregation, first lender, first risk position, portfolio guarantees, technology performance insurance booster, front-end engineering design grants etc. We need to be specific about the risk and smart about the use of concessional money.  5. FOAKs are capital intensive but capital efficient Data comparing digital and deep tech scale ups show what many find surprising - that deep tech is more capital efficient than digital. Additionally, the money for deep tech is used not for customer acquisition but to build actual plants that can be used as collateral for further leverage. FOAK data are scarce because these projects are FIRST of a kind, but the data we do have suggest that we need to nuance our perception on deep tech investments. 6. Courage Many financiers have previously burnt their fingers taking on too much risk. It takes courage to learn from the past, keep pushing the agenda forward and leaning in. We are therefore very grateful to everyone who did lean in on Tuesday.

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