Jeffrey Ubben is betting on widescale adoption of clean energy through his new fund Inclusive Capital Partners, which he launched in June after stepping away from ValueAct to focus on sustainable investing full time.
His fund is the lead investor in a company being formed through a partnership between Schneider Electric and private equity firm Huck Capital. The new venture will develop and run on-site microgrids for commercial and industrial buildings.
Companies' motivations for transitioning to renewable-powered microgrids are many. Not only does it reduce a corporation's carbon footprint, it also provides greater resiliency. The wildfires in California and subsequent blackouts illustrate the shortcomings of the current grid system.
But small and medium-sized companies often lack the resources and capital for the high upfront costs associated with building microgrids. The newly formed venture will target this area of the market, and aims to develop at least $1 billion worth of renewable energy projects over the next five years.
"As the grid continues to become less reliable, and the pricing of the power to provide energy off the grid becomes more variable, energy that's secure and prices that are fixed are super attractive to end customers so you know we're seeing a lot of momentum in the category," Steve McBee, founder and CEO of Huck Capital told CNBC.
Cost is also a driving force, and McBee believes that reliably-priced power will shave about 20% from customers' utility bills. The company will also own all of its customers' data, which will help it understand the unique energy needs of its clients.
Ubben said his investment in the partnership was natural since "the environmental goal is perfectly aligned with the business goal."
Currently, about 90% of buildings in the U.S. and Canada are small and medium sized, which means a potentially large total addressable market. "This is such a small market right now, $4.5 billion, but it's going to grow 2X every three years from here we believe," he said.
On the emissions side, the average commercial microgrid using renewables leads to 10,000 tons of greenhouse gas savings over its lifespan, which is equivalent to roughly 21 million car miles, according to a statement from Huck Capital and Schneider.
Ubben made his name as an activist investor while at ValueAct, which he founded in 2000. In his last few years at the firm he oversaw ValueAct's Spring Fund, which was focused on sustainable investing. So his decision to step away and launch Inclusive Capital Partners was perhaps not entirely surprising.
Key to Ubben's sustainable investing strategy is the notion that focusing on companies seeking to change the world does not 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 businesses that are in the problem, that really need to be part of the solution," he said. Pointing to big oil, for example, he noted that they have the capital, the workforce, the geologists, and the project management skills, among other things, to aid the energy transition.
In the case of Schneider Electric, Ubben said the new venture is a way for the company to carve out and test a clean energy, high-growth business. The new company will operate as an independently-owned entity, but the connection to Schneider will help with sourcing and scaling, while also providing a robust customer pipeline.
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