"Challenges and best practices in financing to accelerate industry decarbonisation", OECD Series of Webinars on low carbon hydrogen and industry decarbonisation, 14 June 2023

1. W O R L D E C O N O M I C F O R U M
Financing the Transition to a Net-Zero Future
Manuela Fulga
Lead, Sustainable Finance
World Economic Forum

2. W O R L D E C O N O M I C F O R U M
2
Critical decarbonization technologies remain underfunded: strategic public
intervention is needed to improve bankability of net-zero projects
Considerations for private finance providers
• Large capex needed for at-scale deployment of new technologies
>> opportunities are typically in the hard-to-fund ‘Valley of Death’
• Deal structuring and commerciality of deal itself will be key
determinants of success
• Still, deals have to enable financiers to i) satisfy financed emissions
targets, ii) action their Net-Zero sector strategies, iii) comply with
regulatory requirements on risk taking, iv) align with the
government’s ‘green agenda’ (e.g. EU taxonomy) v) avoid
reputational risks, amongst other constraints
Case for targeted public sector intervention on transition finance
• Investment teams need to operate within the constraints listed
above to identify, originate, structure and finance deals
• This level of complexity combined with significant investment risk is
hampering the deployment of private finance
Project Finance /
Existing Firms
Source: Venture Capital Investment in the Clean Energy Sector, Ghosh & Nanda, August 2010
Hard to Fund
“Valley of Death”
Bank Debt /
Existing Firms
Venture Capital
Capital
intensity
of
project
High
Low
Low High
Technology Risk

3. W O R L D E C O N O M I C F O R U M
3
Financing the Transition to a Net Zero Future - bringing together financiers,
innovators, industry stakeholders and public sector institutions
50+
Public & private
financial institutions
25+
Industrial
corporations
15+
Technology
experts
3
Public sector
institutions

4. W O R L D E C O N O M I C F O R U M
4
Increase bankability and overcome financing challenges
The innovative blending of capital supported by an enabling ecosystem is needed, where different
sources of public and private capital are brought together in technology-specific financing blueprints. To
do this effectively, mechanisms that activate collaboration among multiple stakeholders are necessary
Transformative business models are essential, where industry participants and capital providers work
together to establish new contracts and ways of doing business to increase the probability of commercial
success.
Targeted public intervention is critical, focused on the design of incentive schemes rewarding early
movers adopting innovative technological solutions and de-risking schemes to mitigate investment risks
unique to these innovative solutions.
A
B
C

5. W O R L D E C O N O M I C F O R U M
5
Innovative blended finance mechanisms: financing blueprint for H2-DRI
technology applied to a steel production plant
Consumers
Private finance providers
Public sector entities
Commercial banks
Hydrogen plant &
infrastructure provider
Insurers
Asset owners
Green steel buyers
Public investment
authorities
Central governments
Project developer
GreenSteelCo’s EAF
Steel Plant
Multilateral dev. banks /
ECAs
Capital Contracts De-Risking Measures
Legend:
Long-term offtake
agreements,
with price support
Renewable energy
suppliers
Special Purpose Vehicle
Industry / Corporates
Affordable supply of
renewable energy
Availability based payments,
Pass-through O&M costs
Typical financing instruments
Project finance instruments
Public procurement,
Contract for difference,
Carbon pricing measures
Technology/
construction
insurance
Capital/construction grants
Technical firms
(EPC)
Independent
technology
verification,
construction &
equipment
guarantees
Equity
Subordinated debt/
patient capital
Export credit agencies
ECA-backed loans/
loan guarantees

6. Overview of FMC
Capital IQ, data as of May 9 2022
$12B
in demand for
near-zero-emission
products
12
government
partners representing
50% of global GDP
…resulting in…
…supported by…
102
total commitments
from 79 companies
across 7 sectors
Carbon Removal
AES
Alphabet
Boston Consulting Group
EGA
Microsoft
Mitsui O.S.K. Lines
Salesforce
SwissRe
Trafigura
Aviation
Airbus
American Express GBT
Apple
Autodesk
Aveva
Bain & Company
Bank of America
Boeing
Boston Consulting Group
Deloitte
Delta Airlines
Deutsche Post DHL Group
EY
FedEx
Fortescue Metals Group
Lufthansa Group (Lufthansa
German Airline, Swiss International
Airlines, Austrian Airlines and
Brussels Airlines)
Nokia
PWC
Rio Tinto
Salesforce
Schneider Electric
United Airlines
Vattenfall
Aluminum
Apple
Ball Corp
Bang & Olufsen
CBA
Constellium
Ford Motor Company
General Motors
Novelis
PepsiCo
Speira
Trafigura
Volvo Group
Cement / Concrete
CCC
Etex
General Motors
RMZ
Vattenfall
Ørsted
Shipping
A.P. Møller – Mærsk
Agility
Aker ASA
Aker Biomarine
Amazon
BHP
Fortescue Metals Group
Höegh Autoliners
Mitsui O.S.K. Lines
Rio Tinto
Trafigura
Western Digital
Yara International
Steel
Aker Solutions
Alfa Laval
Bharat Forge
CCC
Ecolab
Enel
Engie
Ford Motor Company
Fortescue Metals Group
General Motors
Iberdrola
Invenergy
Johnson Controls
Mahindra
Mainstream Renewable Power
Marcegaglia
Ørsted
ReNew Power
Scania
Trane Technologies
Vattenfall
Vestas
Volvo Group
ZF Friedrichshafen AG
Trucking
Agility
Cemex
Dalmia Cement
Fortescue Metals Group
HeidelbergCement
Holcim
National Grid
Norge Mining
PepsiCo
Rio Tinto
Scania
SSAB Swedish Steel
Vattenfall
Volvo Group

7. W O R L D E C O N O M I C F O R U M
7
Targeted policy intervention is needed to generate demand, establish supply
chains, and unlock finance towards breakthrough technologies
d.
Create
transparency
on
transition
pathways
and
plans
e.
Encourage
greater
role
for
MDBs
as
advisers
and
providers
of
capital
a. Stimulate demand through market-based mechanisms
b. Establish mandatory and voluntary offtake of green products
c. Credentialize green products and services
a. Support scaling up of production capacity for green products
b. Ensure uninterrupted availability of production inputs
a. Enhance economic case of business models by offering CAPEX/OPEX support
b. Offer targeted de-risking support to early-mover investors taking on margin & innovation risk
c. Establish enabling infrastructure
I. Generate
demand
II. Develop reliable
and scalable
supply chains
III. Unlock finance
and establish
other enablers
Focus areas Objectives of policy measures

8. W O R L D E C O N O M I C F O R U M
8
Collaboration with the Accelerating Clean Hydrogen community: 3 ways to
accelerate financing for clean hydrogen projects
• Long-tenor contracts for
difference (CFDs) can bridge the
green premium
• Can be used to blend public and
private capital: reduced risk can
help boost investor confidence
and spur project financing (e.g.
with the Connecting Europe
Facility)
• Credibility of the industrial sponsor or
developer for investments vs.
winning technology
• Investors and financial institutions
can rely on a sponsor’s knowledge to
identify off-takers and ship the end
product (e.g. H2 Energy in
Switzerland)
• Investors are favouring
investments into industrial
incumbents at the parent company
level
• Prebaking the ability to co-invest
at the asset level as the portfolio
of projects develops gives
investors further flexibility while
also securing access to a pipeline
of high-quality projects
1. Contracts for difference 2. Credible sponsors/developers 3. Parent companies