Methodology of toolbox for mobilising and redirecting private finance for the green transition

Business case side:This side focuses on the economic viability of an investment.

• CapEx: Initial capital expenditures for long-term assets such as buildings, machinery and equipment, which contribute to the foundation of business operations and play a key role in determining overall profitability.
• OpEx: Ongoing operational expenses required to maintain daily business activities, serving as an important measure for profitability.
• Demand: Market need or customer interest in a product or service as crucial measure for profitability.
• Margin: The difference between the selling price and the unit cost of a single product, serving as a key indicator of its profitability.
• Business case certainty: The level of predictability and reduced risk regarding key investment factors, such as CapEx, OpEx, demand, and margin, which influence the viability and success of a business investment.
• Amortisation structure: Temporal structure of expenses and income, determining when the investment will be profitable.

Implementation side: The existence of a business case by itself is insufficient for investments to proceed. In addition, the right real-economy resources and preconditions need to be in place for an investment to be successfully implemented.

• Human resources: Availability and access to the right personnel required to execute business operations.
• Technology: Availability of tools, systems, and technical capabilities to support business processes.
• Material inputs: Access to raw materials or other natural resources needed for production or service delivery.
• Information: Availability of robust information about all relevant aspects of the investment, for instance the socio-ecological impact of investments, or the consumer demand for sustainable options..
• Administrative efficiency: Level of effort required to comply with regulatory requirements for the investment, including paperwork, reporting, and other administrative tasks.
• Adequate infrastructure: Availability of physical, digital and knowledge systems that are required for the successful implementation of business operations, ranging from roads and bridges over software to innovation ecosystems.
• Economic and political stability: Ensuring a stable economic and political environment that provides investors with confidence and long-term planning certainty. This obstacle is included in our methodology for comprehensiveness, as it represents a significant investment barrier. However, it is not integrated into the web application’s filters, as its broad nature—encompassing framework conditions like democracy building—does not align with the granularity of our policy tools, which focus on directly mobilising and redirecting capital.

Formal power imbalances, where unequal representation and decision-making rights result in a disproportionate concentration of influence within decision-making bodies across organisations and policymaking.

• Imbalanced representation of stakeholders in decision-making processes: Certain groups or perspectives are underrepresented or excluded, limiting the diversity of interests reflected within organisations or policymaking bodies.
• Imbalanced voting rights in decision-making processes: Decision-making power is unequally distributed, whether in corporate governance structures or policy settings, limiting the influence of certain stakeholders in shaping outcomes.

Informal power imbalances: Refers to unequal access to information and differing levels of influence over decision-makers.

• Imbalanced access of decision-makers to information, which creates disparities in the ability of different actors to make informed decisions, leaving some stakeholders at a disadvantage in the decision-making process.
• Imbalanced influence on decision-makers, where external influence distorts decision-making to serve their own interests (e.g. through lobbyism, market power and concentration, socioeconomic inequalities, or unbalanced opinion leadership).

Fundamental Preferences: These are deeply ingrained beliefs and assumptions held by decision-makers that shape how they perceive problems and solutions. Often unchallenged, these preferences influence decision-making by establishing what is seen as feasible, acceptable, or appropriate, thereby guiding the course of action. Key aspects include:

• Notion of Value and Purpose: The underlying belief about what is worth pursuing, whether driven by financial returns, societal well-being, or long-term sustainability.
• Time horizon of decision-making: Decision-makers may undervalue future benefits, leading to a preference for short-term gains and neglecting long-term systemic changes.
• Risk preferences in decision-making: These refer to the attitudes and tendencies of decision-makers toward uncertainty and potential outcomes. They reflect how much risk an individual or organisation is willing to accept in pursuit of a desired goal, influencing decisions on investments.
• Openness for change: The willingness to challenge existing paradigms, reconsider entrenched assumptions, and adapt to evolving circumstances.
• Degree of optimism: The prevailing outlook on the future, reflecting whether decision-makers tend to expect the future to bring more opportunities than threats.

Habits: Habits are learned patterns of thought and action that, while more flexible than deeply held beliefs, shape daily decision-making and reinforce systemic inertia or change.

• Role perception: Implicit beliefs about who holds power, who drives change, and who is responsible for action within a system, including actors’ assumptions about their own roles.
• Complexity of thinking (assumptions about how systems function): The way in which actors process information, ranging, for example, from linear, cause-effect reasoning to nonlinear pattern recognition. Similarly, some actors might think in fragmented ways, focusing on isolated parts, while others use systems thinking to see the bigger picture.