One of the most significant bottlenecks in scaling climate technologies is not innovation itself, but financing first-of-a-kind (FOAK) commercial projects. These projects fall into a “missing middle” — or more precisely, a “missing middle within the missing middle” — typically at the half-billion-dollar scale. They are too risky for infrastructure and project finance investors, yet offer returns too infrastructure-like for venture capital investors seeking high-growth outcomes.
FOAK projects sit uncomfortably between early-stage innovation and mature commercial deployment. While early R&D can access grants, seed funding, and venture capital, the transition to full-scale commercial plants exposes a fundamental financing gap. Technologies remain technically and commercially unproven. Investors face high construction costs, uncertain markets, policy volatility, and limited operational track records. Even due diligence costs can be disproportionate relative to project size, deterring participation.
The challenge is not a lack of capital, but rather how capital is organized. Today’s financing model is fragmented and sequential rather than coordinated. Traditional finance assumes a linear progression: founders and angels invest first, followed by venture capital, then growth equity, and finally debt and infrastructure investors. Each capital layer waits for another to move first. Venture debt requires strong VC backing. Growth equity seeks commercial traction. Infrastructure lenders demand proven operations, stable revenues, and committed offtake agreements.
This creates a “dependency trap,” where each stakeholder waits for others to de-risk the project, resulting in systemic deadlock. Concessional or public funding alone cannot resolve this. Successful FOAK deployment also depends on credible engineering validation, disciplined cost control, strong market demand, policy support, and revenue certainty through long-term offtake agreements.
A promising way forward is to design an “aligned capital stack” built around the project lifecycle rather than the technology developer. Instead of sequential financing rounds, capital is deployed in a coordinated, milestone-based structure, with different investor classes committing upfront to enter at clearly defined stages of risk reduction.
Under this model, governments and philanthropic investors provide early first-loss or concessional capital to support pilots, demonstrations, and project structuring. Venture investors participate directly at the project level to fund commercialization and FOAK deployment. Growth equity supports engineering, procurement, and pre-construction activities. Debt and infrastructure finance are unlocked only when key milestones, such as performance validation, permitting, policy clarity, and binding offtake agreements, have been achieved.
However, milestone-based capital deployment only works if those milestones are credible. This is where earlier engineering intervention becomes a critical enabler. Engineering firms can engage alongside technology developers well before final investment decisions, helping translate pilot results into scalable plant designs, define commercial configurations, and identify integration challenges early. Crucially, they can structure development into phased, verifiable work packages spanning early concept validation, pre-FEED, FEED, and FOAK-specific scale-up, integration, and performance validation gates, each tied to independently verifiable technical and commercial milestones.
By doing so, engineering moves from a downstream delivery function to an upstream risk partner. It provides independent verification that milestones have been achieved, giving investors confidence to release capital at each stage, while structuring development into phased, assessable packages that allow risk to be progressively understood, allocated, and reduced across stakeholders. It also helps address one of the core risks in FOAK projects: not just financial loss, but operational failure. Even if project risk is financially covered, major infrastructure programs cannot absorb the reputational and societal consequences of non-performance. Early engineering involvement helps ensure that performance risks are understood, modeled, and mitigated before construction begins
Alongside engineering validation, insurance plays an equally important role in unlocking capital. FOAK projects often struggle because risk cannot be clearly allocated or priced. Emerging insurance solutions such as technology performance insurance, warranty backstops, and construction risk coverage can help transfer and manage these uncertainties across stakeholders. For example, insurance can cover the liability associated with deploying novel materials or processes, enabling risk-averse developers and EPC contractors to proceed where they otherwise could not.
Products such as those launched by New Energy Risk, a subsidiary of Paragon Insurance Holdings, provide technology performance insurance, revenue put structures, and other de-risking products for innovative energy technologies spanning renewable natural gas, waste-to-energy, energy storage, biofuels, hydrogen, and carbon management technologies. These solutions are most effective when integrated early into project design and financing structures, which requires close coordination between developers, engineers, and capital providers to define insurable risks and align coverage with technical and commercial milestones.
Together, engineering and insurance create a bridge between technical uncertainty and financial confidence. Engineering makes risk knowable and measurable through early validation and structured design, while insurance makes risk transferable and tolerable by mitigating the consequences if those risks materialize. This combination allows capital providers to engage earlier in the project lifecycle, with clearer visibility on both performance and liability risks.
Beyond individual projects, FOAK developments should be structured as repeatable “platforms”. This includes standardized financial structures, EPC approaches, risk allocation frameworks, monitoring systems, and long-term partnerships with suppliers and offtakers. Engineering teams can further support this by developing modular or standardized plant designs that improve replicability, accelerate delivery timelines, and drive cost reductions for subsequent nth-of-a-kind (NOAK) facilities.
Over time, this platform approach reduces transaction costs and builds investor confidence, transforming FOAK projects from bespoke, high-risk investments into scalable infrastructure opportunities. Ultimately, solving the FOAK financing challenge requires more than capital. It requires deliberate coordination between governments, developers, engineers, insurers, investors, lenders, and offtakers. By aligning risk, timing, and incentives across both the capital stack and the technical delivery process, the “missing middle” can become a launchpad rather than a bottleneck.
About the author
Susan McGeachie is Founder and Chair of the Global Climate Finance Accelerator, launched with the support of the University of Toronto to mobilize capital for the commercialization of innovative climate technologies and IP. She is an Adjunct Professor (Climate Finance) at the University of Toronto and Practice Leader for Climate Response and ESG Advisory at Jacobs Solutions in the Middle East.
