Impact investors emerge as major backers of $2bn US Clean Energy Investment Initiative

Foundations, endowments, mission-driven institutions, and other impact investors are the central players in a new U.S. federal government plan to attract patient capital to clean energy.
The goal of the Department of Energy’s effort, called the Clean Energy Investment Initiative, is to catalyze $2bn of private-sector investment for innovative technologies with the potential to scale-up and hasten the transition to a clean energy future. As of late April, $1bn had been pledged by mission-driven investors including the University of California Board of Regents, the William and Flora Hewlett Foundation, Schmidt Family Foundation and Wells Fargo Foundation.
Timothy Jones, presidential innovation fellow at the Department of Energy, said the growing community of impact investors is a natural match for the government’s clean energy investment-mobilizing efforts. This was one of the government’s insights in crafting the new program, he explained. While the early-stage clean energy investment space has been hampered by mainstream investors’ expectations of short time horizons and fast payoffs, mission-driven investors are more likely to commit patient capital that aligns with new energy technologies’ timeframes.
Meanwhile, other federal government agencies in the U.S. are doubling down on their impact investment-related initiatives, too. Last year the U.S. Small Business Administration (SBA) expanded its Impact Investment Fund program, which was created in 2011 as a five-year pilot. In late 2014, the SBA announced that it would extend the program beyond 2016.The Impact Investment Fund allocates $200m a year in SBA-guaranteed debt to investment funds that are licensed as impact investment companies, which in turn promise to invest at least half of their capital to impact investments. Along with last year’s extension, the SBA also expanded the types of businesses that count as impact investments, adding advanced manufacturers and certain types of technology companies to a list that already included businesses focused on education, clean energy, and low-income communities.
The U.S. Commerce Department is also signaling its support of impact investing. One of its agencies, the International Trade Administration, has partnered with the University of Colorado Law School to study impact capital and social stock exchanges, said Dale Tasharski, the ITA’s minister counselor for commercial affairs at the U.S. Embassy in Berlin, at the Impact Capitalism Summit in Chicago last week. The ITA also regularly partners with Big Path Capital, an Asheville, North Carolina- and Atlanta-based sustainability advisor, on regular Impact and Sustainable Trade Missions, which send U.S.-based impact fund managers to regions around the globe to meet limited partners like family offices, high-net-worth individuals, pension funds, and others. The next ITA-supported Impact Mission will head to Asia. Tasharski said the explanation behind his agency’s support of the space is simple: “Our job is to enhance the competitiveness of U.S. businesses abroad, and impact investing is becoming a critical tool in doing that.” He added: “Impact investing is a growing part of finance with the potential to grow more.”