Sustainable finance
Project Finance
Definition
Project finance is the long-term financing of infrastructure and industrial projects based on the projected cash flows of the project itself rather than the balance sheets of its sponsors. A special-purpose vehicle holds the project; lenders have limited or no recourse to sponsors if the project fails, making rigorous allocation of construction, market and political risks central to the structure.
References
Source imported for editorial provenance.
This reference provides supporting context for how “Project Finance” is defined and used.
Overview
How it is used
The model finances power plants (including most utility-scale renewables), transmission, ports, mines and PPP infrastructure; sustainability-linked features increasingly appear in loan terms.
Why it matters
Most of the physical assets of the energy transition will be financed this way; the standards applied in project finance will materially shape what gets built and how.