How We’re Building Lighthouses for the Financial Sector

RMI’s Deal Lab will gather and share lessons from “lighthouse” energy financings to make the next dozen deals in that sector happen cheaper and faster.

Some deals take longer than others. At the height of the COVID-19 pandemic in 2020, a gas-fired power plant in Illinois secured $875 million in debt financing just three months after appointing bankers and investors to arrange the loan. In November 2023, an innovative lithium mine in Germany took eight times as long to raise a comparable debt package, despite booming demand for critical minerals and a marquee investor roster.

The difference wasn’t project quality. It was risk perception and the complexity of financing new business models and critical infrastructure.

Markets know how to fund what they’ve seen before: pipelines, data centers, solar farms. But for emerging, low-carbon technologies, such as thermal batteries and sustainable aviation fuel, even shovel-ready projects can stall in years of finance negotiations. Bankers must align dozens of stakeholders (investors, customers, suppliers, insurers, technology providers, construction firms, accountants, regulators, etc.) around key terms and risk-sharing structures before the project developer runs out of money.

These delays make projects that deploy emerging technologies expensive, risky, and often unviable. This is dampening enthusiasm for energy transition investment opportunities at a time when it must be rapidly expanding.

RMI’s Deal Lab breaks this cycle.

By encouraging earlier engagement in the deal cycle from key transaction participants, RMI’s Deal Lab helps shape projects, improve bankability, and accelerate financing readiness. In our Role of Banks report, we outlined the need for a recalibration of expectations on banks’ role in the energy transition, oriented around getting transactions done by playing to the strengths of different actors across the financial ecosystem. RMI’s Deal Lab sets both the new expectation and provides the means to implement climate leadership. It invites financial institutions to demonstrate commitment through the giving of time, capacity, and capital to get lighthouse transactions over the finish line.

RMI calls this new effort “Deal Lab” not to evoke experimentation, but to highlight the often-overlooked role of financial learning in commercializing new technologies. This corrects a key flaw in target-setting to date: the separation of climate ambition from the core services and smart investing strategies that banks provide.

Vulcan Energy Resource’s (Vulcan) lighthouse lithium deal presented a novel underwriting challenge to investors because it featured several innovative elements. On the technical side, the project combined on-site geothermal heat and power generation with lithium refining. Financial innovations included “preferential supplier status” to attract specific equity co-investors.

Nearly two years after formally appointing BNP Paribas as financial advisor, it secured over €1.2 billion in debt commitments, signaling investor confidence once the risks were understood and appropriately shared.

In Vulcan’s case, BNP showed what bank leadership looks like: being in the room when market-making happens. The investors who show up early are the ones who will learn first, and the ones the market will trust as these opportunities scale. That’s the role (and opportunity) of banks and finance.

For the investment banks (like BNP in the example above) that usually do much of the stakeholder coordination behind the scenes, time is money. Every minute bankers spend learning the ins-and-outs of a new technology or market is a minute not spent on a simpler deal that could be generating structuring fees sooner.

Still, some institutions see these early, complex transactions as where long-term value begins.

“Lighthouse transactions require sustained commitment from institutions willing to engage early, stay close to the deal, share learnings, and build new norms among counterparties,” said Nabil Bennouna, Principal on RMI’s Climate Finance team. “RMI’s Deal Lab helps ease the burden on any individual dealmaker as they navigate the complexity of financing the scale-up of new technologies.”

RMI will accelerate bankers’ and investors’ learning process by applying lessons from years of successful and continued first-of-a-kind (FOAK) project advisory work. Doing so will lower transaction costs by reducing the time spent on diligence and negotiations. From August 2022 to December 2024, RMI’s 100-person Industries program advised 18 large projects (50 percent reached final investment decision compared with 20 percent globally) and conducted three critical functions that banks normally play when there is sufficient commercial incentive to do so:

1. Clarifying upside opportunities and downside risk management through consensus-driven financial modeling and technoeconomic due diligence.
2. Developing new deal terms to manage nascent market risks and align a deal’s risk-return profiles with investors’ appetites.
3. Kickstarting norms and translating key metrics between developers and the varied types of investors in complex capital stacks and across new commercial agreements.

RMI’s dedicated support helped cut through the noise of competing priorities to ensure that attention and resources stayed focused on these lighthouse projects. RMI’s Deal Lab will play three roles until the market can take over:

1. Upskill developers and professionalize investor relations: Help developers move from expensive equity to cheaper commercial debt by translating their project value propositions into terms that align with later-stage investors’ norms and expectations.
2. Innovate deal structures: Create new templates to align different capital providers’ (equity, credit, insurance) risk-return profiles through multilateral syndicate working sessions that simulate real deal conditions.
3. Build an investment engine: Make a stronger case for targeted concessional capital interventions in high impact projects and crowd-in private capital by participating in the development of new investment vehicles.

Roadshows will widen the project’s prospective pool of funders while public data rooms will deepen it. Together, they should help shorten financing timelines because capital markets have already been prepared to diligence and fund innovative deals in that sector. This should mitigate some first-mover risk that can prevent pioneering dealmakers from entering the market.

From 2020 to 2025, the sustainable finance community mainly focused on standards and disclosures. The next five years must see a shift towards transaction-level support, and ultimately, increased deal flow.

The wind and solar industries took around 20 years (and many expensive iterations) to attract cheap, plentiful capital. We don’t have time for this maturation to happen organically in other critical sectors. Lighthouses shine a pathway for others, but someone must first build the lighthouse. RMI’s Deal Lab will enable lighthouse transactions by aligning key counterparties around technical assumptions, contract design, risk management mechanisms, and monetizing new sources of value much earlier and faster than would happen without constructive intervention.

If you are a financial institution, funder, law firm, insurer or project developer interested in learning more or partnering, reach out to RMI’s Deal Lab lead Nabil Bennouna at nbennouna@rmi.org.