Data drives the ‘social ecosystem’ for project finance
To scale up sustainable infrastructure, investors need to collaborate with one another on complex, document-heavy processes — but first, they must find a common language.
In his appearance on the Watts Up podcast earlier this month, Banyan Infrastructure CEO Will Greene explained why creating that language requires more data and better frameworks. Will spoke to Watts Up host Conner Allen and guest host Ryan Suchsland about the disjointed nature of project finance today, the tech solutions that enable stakeholders to work together, and Banyan Infrastructure’s vision of a virtual ecosystem that fosters collaboration, brings standardization to an evolving deal-making landscape, and promotes innovation to meet the demands of the future.
Project finance isn’t the most talked-about facet of sustainable infrastructure. As the need for investment grows, the sector needs to keep up: Slow and inefficient deal-making processes remain a major hurdle, particularly for mid-tier commercial and industrial projects, driving up the cost of capital and making projects less bankable.
“One of the reasons that we haven't deployed enough sustainable infrastructure today is that it's not sufficiently rewarding,” Will explained.
However, this is a solvable problem: With more data and better frameworks, developers can make a stronger case for the bankability of their projects, and financiers are better equipped with the metrics needed to make informed decisions about project risk. Tech solutions like Banyan Infrastructure’s project finance software achieve both of those goals, making stakeholders better positioned to “effectively take [a] project through its entire lifecycle in a low-risk, high-reward scenario,” Will said.
Having a common language around project finance — from standard definitions of key metrics to commonly used data points for evaluating risk — also creates an ecosystem where collaborators are able to prove the viability of a project and trust in the information delivered to them. This sets the stage for a world where project finance is able to scale in response to the urgent need for more sustainable infrastructure, cutting down on the cost of capital.
“We want [financiers] to do many, many, many more projects. We want to make it fast, we want to make it [easily] auditable,” he said.
Trusted common frameworks also create a path forward for hard-to-finance projects by developing and tracking standardized data points over time. A first-of-a-kind (FOAK) technology becomes more deployable if stakeholders have easily accessible data to back the risk profile and forecasted performance, causing it to be more bankable, Will explained.
Ultimately, the aim of project finance software should be to simplify and streamline the deal-making process by developing a clear, scalable roadmap for sustainable infrastructure projects seeking capital.
“We don't want people to come in and say, ‘Is that money being deployed [in the most effective] way?’ We want them to be able to see that it is being deployed” with the highest impact, Will told Conner and Ryan.
“And then we want to show them what it did at the end in terms of return,” he added. If there are ESG metrics that need to be proven, for example, using a solution like Banyan Infrastructure can produce reports that verify how the project has performed from a financial and operating perspective.
Banyan infrastructure’s ability to collect and harness data not only helps to increase the bankability of these projects but also provides tangible time savings for users. One of the platform’s first customers saved more than 1,000 hours in their first year using the software, Will recalled, and managed to pay off the cost of Banyan Infrastructure within months thanks to those savings.
“Throughout the [deal] lifecycle, everything gets faster and better by deploying an enterprise SaaS solution that solves these [pain] points, and that ultimately makes it so we can solve our 2050 [climate] goals.”