Jeffrey Ubben is counting on the extensive clean energy rollout through his new Inclusive Capital Partners fund, which he launched in June after stepping down from ValueAct to focus on full-time sustainable investing.
His fund is the primary investor in a company formed through a partnership between Schneider Electric and private equity firm Huck Capital. The new company will develop and operate microgrids for commercial and industrial buildings on site.
Companies are motivated to switch to renewable microgrids in many ways. This not only reduces a company's carbon footprint, but also offers greater reliability. The California forest fires and subsequent blackouts illustrate the shortcomings of the current grid system.
However, small and medium-sized businesses often lack the resources and capital to meet the high up-front costs associated with building microgrids. The newly formed company will target this market area and develop renewable energy projects valued at at least $ 1 billion over the next five years.
"As the grid is becoming less and less reliable and the pricing of electricity used to supply electricity outside the grid becomes more variable, secure energy and set prices are very attractive to end customers, so you know we're seeing a lot of it." Dynamic in this category, "Steve McBee, founder and CEO of Huck Capital, told CNBC.
Cost is also a driving force, and McBee believes that electricity at a reliable price will save about 20% on customers' utility bills. The company will also have all of its customers 'data to understand its customers' unique energy needs.
Ubben said his investment in the partnership was natural because "the environmental goal is a perfect match with the business goal".
Currently, about 90% of buildings in the US and Canada are small and medium in size, which means a potentially large total addressable market. "This is such a small market right now, $ 4.5 billion, but we believe it will grow twice every three years from here," he said.
On the emissions side, the average commercial microgrid with renewable energy leads to a lifetime of 10,000 tons of greenhouse gas savings, which, according to a statement by Huck Capital and Schneider, equates to approximately 21 million automobile miles.
Ubben made a name for himself as an activist investor at ValueAct, which he founded in 2000. In his final years with the company, he led ValueAct's Spring Fund, which focused on sustainable investing. Hence, his decision to step down and form Inclusive Capital Partners may not have been entirely surprising.
The key to Ubben's sustainable investment strategy is the notion that focusing on companies that want to change the world doesn't have to come at the expense of shareholder returns. It can even make sense to invest in the biggest offenders and then push for change.
"My fund is looking at legacy companies that are in the problem and really need to be part of the solution," he said. For example, he pointed to large oil and noted that they have the capital, workforce, geologists and project management skills to support the energy transition, among other things.
In the Schneider Electric case, Ubben said the new company is an opportunity for the company to develop and test a high-growth clean energy business. The new company will operate as a standalone company, but the connection with Schneider will help with sourcing and scaling while providing a robust customer pipeline.
Other investments by Ubben include Nikola as well as the energy supply company AES and the bioenergy name Enviva.
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