Green Finance: The Role of US and China in Scaling Funds

Conference emphasizes potential for international collaboration

Puon Penn uses an amusing analogy to answer questions about project finance at "Bringing Finance to Scale" in San Francisco on Dec. 8, 2010. (1 min., 45 sec.)
Puon Penn uses an amusing analogy to answer questions about project finance at "Bringing Finance to Scale" in San Francisco on Dec. 8, 2010. (1 min., 45 sec.)

SAN FRANCISCO, December 8, 2010 - Widespread use of green technology could maintain global emissions at manageable levels by 2020 and stabilize temperature increases below 2 degrees Celsius. But in order to achieve these global goals, the level of investment in the clean tech revolution needs to be triple what it is now.

While it isn't clear where these long-term investments will come from, the US and China will certainly play leadership roles in scaling up green finance. The two economies complement each other in striking ways. The US is strong in innovation and China in pilot testing and manufacturing. The US has expertise in innovative financing while China has massive cash reserves. Coordinating efforts to scale green finance represents an opportunity that has barely been tapped to date.

These were some of the opportunities and challenges that leading financiers, businesses, and analysts from the US and China discussed at a daylong conference convened by Asia Society Northern California and the American Chamber of Commerce in Shanghai, in partnership with ChinaSF, the Bay Area Council, the US‐China Clean Energy Forum and the China‐US Energy Efficiency Alliance.

"Bringing Finance to Scale: Creative and Effective Funding Solutions in the United States" included panelists William Hsu, Vice President of Corporate Development, Clean Focus Corporation; Scott Jacobs, Associate Principal, McKinsey and Company; and Puon Penn, Senior Vice President, Head of National Cleantech and Emerging Tech Markets, Wells Fargo Bank. Former California State Controller and Westly Group Managing Director Steve Westly moderated the event.

Jacobs described the global energy system as "a fundamental economic equation" with participants competing not only from the US and China but also Korea, Japan, Israel, and the Nordic countries. The US is still seen as the strongest leader in the clean tech field despite China's significant gains. Jacobs added that while investment in energy enterprises is more acceptable now, clean tech markets suffer from uninformed investors who cause a "human capital gap."

Penn commented on the role of large US banks in clean tech investments. "Almost everyone needs to be involved," he said. Wells Fargo's strategy is to "develop long-term relationships not only with the venture capital community, but also with clean tech companies." Penn used an amusing analogy to answer questions about project finance, as seen in the video below: 


Hsu described his firm, Clean Focus, as "more nimble" compared with Wells Fargo because it invests in US projects with capital from Asia for return rates considered quite low by larger investors' standards. He said companies that have a robust product and data could successfully raise capital for projects even before they are "bankable," by using reinsurance and other financial hedges. 

The panelists agreed that despite the renewable energy sector's high-tech aspects, the market's capital-intensive nature means comparisons with the information technology boom are not always apt. Nonetheless, the diversity of projects needed, the sheer scale of global energy markets, and the persistent supply-demand imbalance that characterizes the industry makes clean tech an attractive investment for both small and large investors.

Reported by Nick Sternhagen, Asia Society Northern California