By Haresh Patel, CEO
Mercatus
The solar sector has evolved over the last few years with increased interest from institutional investors to allocate capital to the sector.
As investment sectors develop in the capital markets, investors look for standardization, transparency and liquidity to allocate capital to the sector. A key to reducing capital friction and increased allocation of capital in the sector is to develop operational excellence and streamlined investment processes supported by robust analytical platforms.
Credit scoring, risk analysis and workflow management systems allow for a replicable process for credit assessment, data harmonization, optimal throughput, and resource management.
While large-scale utility projects can bear the cost of bespoke due diligence, underwriting and securitization, the growing residential and middle-market commercial segments need highly efficient business processes and information technology to streamline the flow of capital investments.
The current spreadsheet based credit analysis processes are a limiting factor for the industry that will not allow the industry to scale.
Harnessing the strength of robust analytical platforms, investors can create better liquidity and capital flows for projects, resulting in better risk-based pricing and closure rates.
Scalability of capital allocation is achievable with a standardized process, without the need to increase overhead. Utilizing a standardized credit assessment process, projects can be compared and measured against a uniform methodology across the enterprise creating efficient scale for capital deployment.
The solar sector is moving towards an institutional investment asset class.
The need to have well defined and standardized methodologies for assessing credit and risk will insure broader access to capital market players, enabling reduced capital costs, greater efficiency in transactions and significantly lower operational overhead.
A robust credit and risk analysis ecosystem should have the following capabilities:
• Efficient Deal Origination
• Deal Processing & Aggregation
• Structured Credit Underwriting
• Executive Reporting
• Closing & Processing
• Post Closing Accounting and Monitoring
Organizations that can harness the power of a unified front-to-back credit and risk ecosystem can be the efficient player in the market – ensuring increased velocity of capital flows.
The smart investors will leverage their unified operational and analytical process to reduce expenses and position their firms to take advantage of economies of scale in their investment strategies, insuring broader access to the sector.
Forward thinking firms will implement systematic processes for investment management thereby ensuring accountability, increased closure rates and collaboration across stakeholders in the value-chain.
More efficient capital flows increase the velocity of capital and increase the returns for investors, something all investors can appreciate.
