In selecting investments most financiers will focus on the two criteria of risk and return - higher perceived risk results in higher expected return, with the level being primarily set by the market. Different financiers will have different preferences for risk and return. An impact of the emphasis on risk, and compensation for that risk through increased return, is that the private sector will find it most difficult to finance high risk, longer term projects. Many environmentally sound technologies are essentially of this nature with low operating costs and high up front expenditure. In trying to alter the behaviour of the financial markets, governments can choose regulation or persuasion.
Regulation is unpopular with financial institutions, particularly internationally.
However, to be relevant these aspects have to be looked at in the context of an individual financing problem or type of finance. Understanding the role of private finance in technology transfer necessitates some understanding of the detail of different forms of finance in technology transfer. There is a very wide range of types of finance which are potentially relevant in financing technology transfer. Their relevance depends on the specific opportunity under consideration. For example, financing the establishment of a PV module factory in the developing world has different challenges from providing finance to households to enable them to purchase the solar home systems produced by the plant.