Executive Summary
The transition to a net-zero economy requires urgent action to scale up clean technologies. However, despite technological advancements, a significant investment gap and risk barriers prevent many innovations from reaching full market adoption.
This white paper summarises key insights from a corporate roundtable discussion with experts from finance, industry, and policy, examining the main barriers to clean tech deployment and exploring solutions such as blended finance models and demand-pull mechanisms, such as Advance Market Commitments (AMC).
Key themes include:
- Financial & risk challenges: Scaling clean technologies, particularly First-of-a-Kind (FOAK) projects, faces significant financial and operational risks.
- Blended finance solutions: Public-private investment models, first-loss mechanisms, and corporate-to-corporate offtake agreements can help de-risk investment.
- Advance Market Commitments (AMC): Inspired by vaccine procurement strategies, AMCs create guaranteed demand for innovative low-carbon solutions, helping unlock investment.
- Government & policy interventions: Clear regulatory frameworks and public-private partnerships are essential for mobilising investment and scaling deployment.
The Roundtable session was conducted under Chatham House rules.
Introduction
Despite global commitments to net-zero targets, many clean technologies face challenges in securing investment and scaling beyond pilot projects. While existing technologies can deliver on 2030 climate targets, 35% of the required solutions to achieve net zero by 2050 are not yet commercialised.
The International Energy Agency (IEA) highlights that for clean technologies to meet climate targets, deployment must scale by a factor of six. However, scaling is hindered by:
- Financial constraints: High upfront costs and uncertain return on investment.
- Operational risks: Performance guarantees and insurance challenges.
- Market fragmentation: Lack of demand aggregation for new clean technologies.
This paper explores solutions discussed in the roundtable, particularly blended finance models and AMC mechanisms, which can help bridge the investment gap and accelerate market deployment.
The $6 Trillion Challenge: Why Clean Tech Implementation is Falling Behind Net-Zero Targets
1. First-of-a-Kind (FOAK) Challenges
New clean tech solutions require a significant upfront investment, but uncertain economic returns and deployment risks deter private investors. Without proven market viability, FOAK projects remain high-risk, limiting their ability to secure funding.
2. Short-Term Financial Priorities
Corporate finance teams tend to prioritise projects with short payback periods, whereas clean tech investments often require five to seven years for financial returns. This short-term investment focus creates a misalignment between corporate capital allocation and long-term decarbonisation goals.
3. Construction & Procurement Risks
Conservative risk assessments and slow procurement processes often hinder investment in clean tech. For example, the specification of novel sustainable construction materials require new risk evaluations, regulatory approvals, and contractor buy-in, which delays large-scale adoption.
4. Uncertain Capital Flows
While climate investment funds exist, there are funding gaps at the commercialisation stage. Many start-ups struggle to transition from early-stage VC funding to large-scale deployment financing, stalling the growth of innovative clean technologies.
Breaking the First-Mover Barrier: Understanding Cleantech’s Investment Roadblocks
Bridging the Gap: How Blended Finance is Making Clean Tech Investment Viable
Blended finance, which combines public and private capital, emerged as a crucial tool for de-risking clean tech investments. Categorising companies into archetypes based on capital requirements and risk profiles enables more targeted financial interventions.
One key approach discussed was first-loss mechanisms, where public institutions such as the UK Infrastructure Bank (UKIB) absorb initial losses, making private investment more attractive. This structure can bridge the financing gap by instilling greater investor confidence in clean tech viability.
Additionally, Credit Default Swaps (CDS) were highlighted as an emerging financial instrument in the US clean energy market. Banks are now offering insurance-backed CDS models for renewable projects, reducing financial risks for investors. Participants suggested that this model could be adapted for the UK market.
Another promising approach is corporate-to-corporate offtake agreements, which involve long-term purchasing commitments between businesses. These agreements provide revenue certainty, making it easier for clean tech companies to secure investment and scale production.
From Vaccines to Clean Tech: Advance Market Commitments (AMC) as the Missing Link
AMCs are a market mechanism where corporates or governments commit to purchasing innovative products in advance, such as signing offtake agreements, to reduce investment risk by guaranteeing future demand for new clean technologies if they meet a set of technical and commercial requirements. This model was successfully used in vaccine development and is now being explored for clean tech deployment.
An AMC creates a pre-committed market, making projects more bankable, and encourages innovation by signalling guaranteed demand to investors, de-risking investments. This accelerates commercialisation by bringing together buyers, suppliers, and finance institutions.
A UK-based initiative, led by Innovate UK in partnership with Carbon Limiting Technologies, aggregates corporate commitments to purchase novel low-carbon concretes, ensuring market demand. By reducing demand uncertainty, the AMC provides a clear incentive for investors to finance the production and deployment of low-carbon materials.
Building Consensus: Uniting Public and Private Sectors for Clean Tech Scale-Up
There was broad agreement that finance is not the only challenge—risk is equally important. Participants highlighted that FOAK projects face high capital expenditure, uncertain payback periods, and commercial risks, making them unattractive to traditional investors. The need for de-risking mechanisms such as blended finance and AMCs was widely supported.
Most participants agreed that blended finance is essential to bridge the funding gap. Several mechanisms were discussed. There was a shared understanding that public institutions should play a larger role in taking on early-stage risk. The example of low-carbon concrete was particularly well received, demonstrating how an AMC could help clean tech scale beyond pilot projects. AMCs were widely regarded as an important potential solution for accelerating clean tech adoption. Participants saw it as an effective way to signal market demand, giving investors confidence that there will be buyers for innovative clean technologies.
There was also general agreement that policy intervention is necessary to align investment with sustainability goals. Without clear regulatory signals and government incentives, the private sector is less likely to make bold investments in clean technology. Government-backed insurance, tax incentives, and regulatory mandates were discussed as ways to accelerate adoption.
While most participants agreed that government support is necessary, there were differing views on how much intervention is required, as well as who should take on the majority of the risk — government or private investors. Some participants expressed optimism about clean tech investment, while others were concerned about macroeconomic risks, such as inflation, interest rates, and geopolitical uncertainty. It was also mentioned that many financial institutions are still risk-averse when it comes to clean tech.
Accelerating to Net-Zero: A Blueprint for Clean Tech Implementation
Scaling clean technology demands financial innovation, structured market mechanisms, and a collaborative approach across industries. The roundtable discussion reinforced the urgent need for strategic coordination between policymakers, investors, and industry leaders, with participants emphasising that blended finance, risk mitigation mechanisms, and regulatory support are crucial for overcoming deployment barriers and accelerating commercialisation.
Written by