Green is the new greed on Wall Street, or about to be, as the new Biden administration is poised to unleash a wave of climate and clean energy reforms.

In the first days of his term, President Joe Biden ordered the U.S. to rejoin the Paris Climate Agreement, abandon the Keystone oil pipeline, and end energy exploration on federal lands. This stands in stark contrast to former President Trump who mocked the science of human caused climate change and rolled back nearly 100 environmental protections. 

Biden’s presence in the White House signals a sharp u-turn, but addressing climate change will require more than a stack of executive orders to undo Trump’s environmental offenses. It will also require corporate buy-in — and the technology sector will play a key role in this effort. 

To achieve Biden's bold climate vision, reach net-zero emissions by 2050, and achieve zero-carbon electricity by 2035, Biden will need private sector buy-in and lawmaker support, Special Presidential Envoy for Climate John Kerry said in a press briefing last week.

“We can actually grow, significantly, millions of clean energy jobs,” Kerry said. “And all of a sudden, the question won’t be whether the private sector is going to buy into it; the private sector is going to drive it.”

The clean energy transition won’t happen simply because it’s the best choice for human health and the environment. Companies and investors first must be convinced that building America’s clean energy economy is the profitable thing to do. As Larry Fink, chairman and CEO of VC firm BlackRock stressed in his annual letter to chief executives: “Climate transition presents a historic investment opportunity.” 

“Sooner than most anticipate, there will be a significant reallocation of capital,” Fink wrote. “We believe that sustainable investing is the strongest foundation for client portfolios going forward.” The company, which manages nearly $9 trillion worth of global assets, wields considerable market power to direct how capital is allocated and aid the fight against climate change. 

Throwing money at the problem, however, won’t be enough. According to the International Energy Agency, more than a third of future emissions cuts will come from emerging technologies that are currently at the prototype stage. 

The time to change our climate trajectory is narrowing, and it’s vital that these technologies get out of the R&D lab and into production as quickly as possible. Except mobilizing the economy to commercialize new clean technologies isn’t that simple – yet.

“The majority of the intellectual property resides in small companies that cannot generate the capital for R&D and the big companies in many cases do not believe in accelerating change,” TerraScale President Mark Schonberg said about what he described as “a really wicked problem.” 

Early-stage venture capital (VC) investment reached $4 billion in 2019, according to the International Energy Agency (IEA). However, the number of global VC deals accounted for by clean energy halved since 2012. The IEA reports “while the initial value of many energy technology startups lies in the patents they hold, fewer patents have been filed for low-carbon energy technologies each year since 2011.”

Patents provide an insight into the research activities about the extent and focus of clean technology innovation. With this knowledge, the patenting decline means global clean energy technology development could be shorted on investment opportunities to protect, license, and sell their work.

And therein lies another problem: clean technology isn’t the perfect candidate for the risk, return, or time profiles of traditional VC investors — especially the earlier-stage startups with capital intensive business models that are hard to predict such as energy.

“There's a whole lot of things that we just won't touch because something that takes $100 million to see if it fundamentally works is just a lousy fit for venture,” said Joshua Posamentier, managing partner and co-founder of Congruent Ventures, an early stage venture firm that backs companies in the sustainable technology ecosystem. 

If the clean energy technology we need to reach net-zero emissions resides in small companies that can’t get out of R&D, and the private sector can’t risk the return on capital intensive technologies, then who or what will finance the clean energy transformation?

“I think the Biden administration is going to put its effort into development and deployment,” Posamentier said.

To boost activity, the IEA found some governments are exploring direct investment in clean energy start-ups, for example by taking so-called “anchor” equity stakes in riskier start-ups. 

Over the last decade the government has spun up a bunch of shared resources such as the advanced biofuel demonstration facility at Lawrence Berkeley National Lab. This facility lets a nascent startup with an idea for, say, biofuel, prove functionality out on shared resources they don't have to purchase, Posamentier explained. “It basically takes the cost of demonstrating something from $50 million, which is just unsustainable for ventures, down to a million, which, all of a sudden changes the economics.” 

Biden’s administration has a major role to play in supporting innovation, especially in areas that the private sector perceives as being too risky. One of the ways it can do this is by integrating energy policies into government responses to the COVID-19-induced economic crisis. Introducing more shared resources that drive down the cost of R&D lowers the bar of entrance for more early-stage, private sector investments. 

Historically speaking, this is not so different from the early days of ocean exploration where monarchs sponsored early expeditions that were expensive, very risky, and potentially highly profitable, explained Ernestine Fu, an investor at venture capital firm Alsop Louie Partners, in a blog post. “By doing so, they created new trade routes and new markets, and after a while, trading companies and the rest of the private sector took over," she said. "The original investments paid huge dividends to their countries.”

In many ways, this presents Biden with a once-in-a-lifetime opportunity to reboot the U.S. economy and bring a wave of new employment opportunities while accelerating the shift to a more resilient and cleaner energy future.