Q1: The Lemelson Foundation has long focused on invention-driven impact. Scaling climate solutions is often a challenge. What strategies can bridge the gap between early-stage innovations and large-scale deployment, particularly in emerging markets like India?

Maggie Flanagan: The scaling challenges inherent in climate solutions mirror those faced by invention-driven businesses across diverse sectors. However, climate action’s inherent urgency presents a potent catalyst for collaboration. This urgency, I believe, is the driving force behind the increases in blended finance structures designed to meet the needs of investors operating across the impact-return spectrum. We’re seeing sophisticated models with dedicated pools: one dedicated to nurturing earlier-stage investments, the other to fueling growth and accelerated adoption. Value addition by the fund managers to mitigate risk while deploying initial investments from the early-stage investment pool is critical. Then, the ability to lead a subsequent round and crowd in later stage syndicates shortens the time the companies otherwise spend fundraising for that next round. We’re also seeing that working capital for companies that receive growth investments is critical, so fund managers are pioneering innovative approaches to unlock debt financing. A decade ago, in other sectors, The Lemelson Foundation was among a few flexible, impact-first investors willing to invest in technically savvy first-time fund managers raising seed funds that might participate in a handful of Series A follow-on rounds. Today, the climate imperative has catalyzed a widespread adoption of blended finance structures, creating an unprecedented opportunity to accelerate the timeline for a new technology to reach scaled adoption and have impact.

Q2: The Lemelson Foundation’s climate strategy focuses on energy and opportunity in the Global South, and leverage and leadership in the Global North. Can you elaborate on what makes each of these geographies unique in terms of climate action strategy and what challenges and/or opportunities they uniquely present?

Joel Clement: In the North, the bulk of philanthropic and climate impact investment dollars are poured into the energy transition and transportation, the top two sources of greenhouse gas emissions. Those dollars are crucial because the emissions from these sectors are staggering, and electrifying or converting the energy and transportation sectors in the North is extremely expensive. Whether it’s exploring the potential of hydrogen or addressing the variability of renewable energy sources, the solutions are extremely costly. This is the right place for large climate funders to focus. Because of the significant capital outlay required, however, these sectors may not represent the most strategic allocation of resources for smaller funders, except in unique circumstances, such as on Tribal lands, where few resources are available to advance the energy transition that climate justice demands. There are sectors, however, that present opportunities for smaller funders to leverage significant federal or private capital. Examples include industry decarbonization, methane leak mitigation, and the energy transition on Tribal lands, where projects and innovations need relatively modest help to become shovel-ready and eligible for federal or venture capital dollars.

Our tactics look different in the Global South. There are fewer massive public investments in green infrastructure to leverage, few venture capital firms trolling for money-making projects there, and civil society has its hands full addressing immediate climate adaptation needs. But there are abundant opportunities to blend technologies, tools, and data from the North with local knowledge and purpose-driven solutions in the South. Innovative finance tools such as regional carbon markets and place-based loan mechanisms are gaining traction; the scale of industry is more modest, but growth is a priority, so leapfrogging to clean industry will be cost effective; and the largest youth population in history is poised to influence solutions in Africa. While funding success in the Global North will require leverage to make a difference, foundations of our scale possess a wider array of strategic avenues for substantial impact in the Global South, offering a critical opportunity to defuse the region’s ticking carbon bomb.

We will have failed if a decarbonized economy marginalizes the same communities left behind since the beginning of the industrial revolution, so all of the above should include commitments to those communities. This means a more inclusive decision table. It means investments in community resilience. It means a more inclusive cleantech workforce and a goal of shared prosperity. It also means investing in bold cohorts of leaders with big ideas and whose faces reflect the world’s diversity.

Q3: While many climate solutions require patient capital, the investment landscape typically favors shorter-term returns. How does The Lemelson Foundation’s funding strategy balance long-term innovation with the urgent need of climate action?

Flanagan: We’re trying to thread the needle and do a bit of both. The Lemelson Foundation launched a new climate action initiative, and we have an Invention and Entrepreneurship (I&E) initiative. Our two-plus decades of work in India, primarily through the I&E initiative, reflect a place-based, regional ecosystem development strategy. This is inherently a long-term strategy committed to place and adaptive to what makes sense in India, at any given time, to enable inventions and businesses to have positive social and environmental benefits. Notably, within the Foundation’s I&E portfolio over the past five years, we’ve seen massive growth in solutions with a role to play in adaptation and resilience. Our climate action initiative, conversely, adopts a global perspective, directly confronting the urgent need for mitigation while emphasizing a just transition. This initiative considers the shorter-term impact that hasn’t been a high priority in the I&E program.

Now that we have both strategies, we’re exploring opportunities at their intersection. We’re particularly excited about the potential to mitigate both current and future emissions in high growth industries. Many of these industries are more fragmented in India, so the solutions developed in places like the US, may not translate. The mechanisms for driving adoption among Small and Medium Enterprises look different and may necessitate longer timelines, but the potential to positively impact the livelihoods of vulnerable populations is correspondingly greater.

Q4: Many breakthrough climate solutions struggle to move from prototype to market adoption. From your experience in supporting novel inventions, what are the most critical factors that determine whether an innovation succeeds in commercialization?

Flanagan: Many of the most novel inventions originate from research, often preceding a defined problem statement or market demand. This model of innovation is absolutely critical, particularly for the transformational solutions required to help humanity adapt and address climate change. However, this model for innovation is also super inefficient and presents a lot of failure. So, what’s needed for it to be successful is different from innovation based on market pull. Its success hinges on a robust R&D ecosystem, characterized by coordinated financial and nonfinancial support. The enabling environment plays an outsized role in determining the success of the individual innovations originating through this model.

There’s a much higher success rate among solutions developed in direct response to a problem or market pull. These innovations still benefit from a well-coordinated enabling environment, but it’s been my observation that internal factors play a more significant role in these types of innovation-based businesses. For example, a team that has a deep understanding of the problem they are trying to solve long before they arrive at a solution is more likely to succeed in building something that customers want. Whatever the journey of solution development, a team that is obsessed with solving a specific problem will have more resilience because no one has ever claimed that commercialization is easy. These are the teams that aren’t just successful in commercializing an innovation, they ensure their solution actually addresses a significant social or environmental issue – at scale – because anything less would not be a success for them. The other critical ingredient is having quality mentors, including investors who get their hands dirty to build value in their investments. As a U.S.-based philanthropy, we know that’s not us, which is why we only invest through local intermediaries.

Q5: Unlike commercial investors, philanthropies have more flexibility to take risks and fund early-stage solutions. How does The Lemelson Foundation see its role in de-risking climate innovations and catalyzing further investment? Are there specific funding gaps you believe philanthropy is best positioned to fill?

Flanagan: Our role has been evolving as the funding landscape in India evolves. There’s much more support for early-stage innovation in India than there was 15 years ago, so we’re providing fewer grants to incubation programs. For the past five years, capital access and market access have been top priorities. We are currently in the midst of a strategy refresh and won’t be deploying any new, unplanned grants or investments this year, but let me share some examples from the past five years that relate to gaps where philanthropy could really strengthen the market.

We use grants and investments towards the same goal, recognizing that both are valuable tools. Grants, from philanthropy, can be an effective tool for reducing the costs of commercialization, not necessarily by granting directly to companies, but by strengthening market channels (e.g. Villgro’s RAIIn facility) to reach markets that have a high cost to access or by supporting solution validation by third parties (e.g. Evergreen Innovation Platform or SELCO Foundation’s SELCAP) whose primary goal is to better meet the needs of an underserved market. We’re most interested in investments (e.g. Synapses) where our flexible funding, which might be accepting disproportionate risk or some concessionary terms, is enabling commercial capital to be deployed in climate tech solutions that it otherwise might struggle to reach. The climate solutions needed in India include plenty of opportunity for this kind of catalytic capital – from philanthropy or other sources – to absorb technical and market risk.

We have embraced experimentation, and I think it’s important that philanthropy has the opportunity to test new approaches to capital mobilization. In one example, we used a grant to support the development of a technical due diligence advisory service. The hypothesis was that if technical expert analysis was made affordable and accessible to angel networks and smaller VC funds – which are primarily generalists – we would reduce barriers for these investors to do more climate tech deals. I don’t think the service has been an outstanding success, but we experimented with a local partner (i.e. Climate Collective) who is equally motivated to see more capital mobilized toward climate action. We learned together, and there’s value in that which often goes unrecognized if philanthropy doesn’t allow for innovative experimentation in service of learning with implementing partners.

Q6: Climate impact measurement varies significantly across different innovations, whether it's carbon reduction, ecosystem restoration, or climate adaptation. How does The Lemelson Foundation approach impact measurement across its diverse climate investments? What, according to you, are the emerging best practices in this space?

Flanagan: We are fortunate that we don’t have to have consistency because our stakeholders don’t require aggregated metrics. Historically, we’ve worked with investees and grant partners to understand their impact thesis, what defines success, and how they plan to measure progress. Each investment has essentially set its own targets. We’re able to look across the portfolio to analyze how many are exceeding targets, are on track, are falling behind, or have failed. Our portfolio is not so large that we can’t dive in to understand and draw learning from individual cases. This has been right-sized for our organization, but it fails to consider how we are catalyzing more investments to have traction against key capital gaps we’re trying to address in our strategy. That has been challenging, and I’m hoping it’s something we address in the near future so we can be more effective in strengthening markets.

Background of The Lemelson Foundation

The Lemelson Foundation, a visionary force in impact investing, was established by Jerome and Dorothy Lemelson in 1992. Dedicated to nurturing invention-based businesses that have the potential to catalyze transformative change, the Foundation champions enterprises that develop unique, physical products to address pressing global and community challenges.

The Lemelson Foundation's strategic philanthropy spans the United States, India, and East Africa, and is designed to foster a fertile ecosystem for emerging invention entrepreneurs. By providing business enablers, financing solutions, and communities of practice, the Foundation empowers these entrepreneurs to realize their full potential and drive transformative change.