TBLI Talk:How to Finance the Energy Transition #2024
okay great our hero is here hey there Jonathan hi Rob Hi how are you doing I’m good I’m good okay so um let me just uh explain people will be joining don’t worry but I’ll let them in uh the vast majority normally watches the replay because of the time we had to change the time and then they have to change their calendar so don’t worry about that so most important is um uh I’ll you know introduce you and you’ll basically tell your journey your story who you are how do you stay so fit you look actually incredible have you gotten some plastic surgery done or [Music] something um so so we’re go we’re going to start and I’ll just let the people in as they come forward so for those of I want to uh thank you very much for doing this and taking the time to share with us your journey and uh particularly in trying to restore the environmental balance by focusing on fuel-free and low carbon um infrastructure so for those who are not familiar with sdcl and not familiar with Jonathan Maxwell or HSBC and all of the uh the incredible things you’ve accomplished in your life just briefly tell us who you are what you do what’s your big purpose and what are your plans going forward in the next five years okay okay perfect what should I get going over it I’m on mute now well look great thank you for having me on I really really appreciate it so um just as quick background and introduction yeah my name’s Jonathan I’m the CEO and founder of sustainable development capital or sdcl um um my background has I’ve been in the uh investment Financial Services business for the last 30 years um the last uh 20 OD of which I’ve been in the infrastructure um sector and infrastructure services and for the last 16 years I’ve been um building and then managing sustainable development Capital as an independent uh investment firm so I I will uh quickly focus on that uh that Journey um I started the company in 2007 uh that was the beginning the the where we are currently is about two and a half billion dollars of um uh assets uh in our portfolios U managed through a series of funds some public and some uh private um the um idea behind sustainable development capital about 15 16 years ago was um I think looking out I felt that um some of the largest and most important thematic and strategic um opportunities were going to be around solving problems associated with the environment and that really means and not just being nice but what that means is you know how’s the energy system going to adapt to the needs of a growing population over the course of the next Generations you know how are we going to how are we going to provide people not just enough energy but also enough sort of other resources that are critical to uh you know essential so for example things like food and water and so on uh how are we going to manage the waste how are we going to get people around my original thinking there was that this was a new class of infrastructure um environmental infrastructure if you like as opposed to some of the infrastructure that I was working on before like social and economic infrastructure so that was the sort of the starting point for sustainable development capital I started the company in 2007 um if you remember back to 2007 it was quite a different time um uh at the beginning of 2007 there were no iPhones the ipcc hadn’t won a Nobel Prize nor at El goore for know for promoting or discussing climate change uh broadly um sustainability wasn’t really a thing one small piece of evidence of that as I was able to get the name of this company sustainable development Capital um but um and you know you could say factiously that nobody really cared much about sustainability but they do now and here we are in 2024 it’s one of the largest I think themes in the financial services and investment Market it’s critical to um most corporate operations um and it’s also pretty much core to government objectives uh targets um uh and I talk about sustainability because I think it breaks down into kind of Three core components um you know one uh very broadly as around energy um and and uh the second is very broadly around climate and then the third is very broadly around security um and I think getting getting sustainability into the energy sector getting sustainability into the way that we can manage around climate change and getting sustainability into the way that we manage security I think are three really critical features um that Define all of the work that we do today and how we make investments um again very high level investment thesis is that for me focused on this word sustainability sustainability is synonymous with resource efficiency um what I mean is if we can be more efficient with the of resources efficiency if we can be more efficient with the ruse of resources in in principle we can do the same or more with less and if we come back to those three pillars of you know energy climate and security if you can do the same all more with less in principle that means that you can do you can create the same amount of energy services or even more using or wasting less energy that explain why that’s important the second is you could actually do the same amount of work on the energy sector without creating as much of a carbon footprint which is critical the climate and then if you can do the same or more with less dare I say it um you may need to fight less over energy which of course the world has been doing uh post the second world war um very often in the Middle East and now very sadly in the Eastern Mediterranean and in Eastern Europe uh with the russes invasion of Ukraine so uh that’s really the sort of the pillar of the organ ization how we think as an investor about resource efficiency why does it matter it’s cheaper it’s cleaner it’s more reliable um and better and more secure than the alternative um last thing I’ll say just thematically Robert maybe TR try and dig into some specific areas that you’re interested in um uh thematically um we F we do focus on energy so a lot of what we do is is is is really around the energy sector and I just explain very very quickly why that we do that because there’s lots of other problems um but very broadly if we look at the this concept of efficiency I think there are three big wins that the world can make in the next 10 15 years the first big win maybe the biggest one is around the energy sector which is one of the reasons we’re so focused on it and the energy is essential to everything nobody can do it we couldn’t be having this conversation without it but isn’t it extraordinary I think it’s the biggest dirty secret of the en sector maybe of the financial system the biggest dirty secret of the whole sector is that about three qus of the world’s energy wasted wow and know and I can unpack it I’ve even written a book about it um which we can talk about in a second but that’s that’s a big big big problem but it’s also a huge opportunity it’s a huge opportunity because um and that’s the big one of the biggest opportunities of the next I’d say decade or two is trying to eliminate as much if not all of that waste that we can and that will have the biggest bang for The Bu from a greenhouse gas emission reduction perspective from an economic competitiveness pers perspective and to help with security that’s one of three major problems and it’s the one I’ll talk about today the fact that we waste about half of the world’s food and a third of the world’s water are also in wor problems that need to be solved but um at sdcl from our investment portfolios In fairness our FOC focuses on the energy sector another reason we’re so focused on the energy sector as I said or intimated was that of all the human made emiss greenhouse gas emissions excess greenhouse gas emissions that the planet can’t absorb of all of those about 80% of them come from the energy sector B defined either in generating or using it and that’s why I think it’s so important to focus on energy not only is it the most propagate example of waste that we have in the in modern society but it’s also the biggest driver of climate change of course Land Management which is where water and food come in uh is critical too we not going to fix climate change without it but our focus is around energy so the last thing I’ll say just thematically are is the our investment thesis is built around this theme we actually have an acronym for it it’s called Edge in the way that we approach our business Edge stands for efficient and decentralized generation of energy that’s the solution to a lot of the energy RTE problems it’s about being efficient and then instead of having centralized energy plant having decentralized energy centers that waste less energy getting where it’s needed so that’s this the the basic background uh who I am I set up the business and run it what I do is invest in solutions to this energy problem that involve um getting lower cost lower carel more reliable energy where it’s needed which we think is so important and then in terms of our plans um and I’m dig into these bits with you Robert in a second our plans are carry on building our infrastructure portfolio it’s about $2 and a half billion dollars of commitment today uh investing at every stage of projects from concept long-term operations of projects that make a difference to cut out that waste but also I think important I should say our plans are expanding uh Beyond infrastructure we’ve started over the last couple of years to start to make investments in companies new technologies that have proven but that can scale up now um so we’re T starting to to take a more of a private Equity um uh involvement in the marketplace as well as um you know and building off the back of of our infrastructure program okay that’s uh that’s great I I have a bunch of questions I’m curious in 2007 when you started uh there it must have been hard selling the idea of resource efficiency or maybe I’m wrong and it was very easy and it was everybody gave you a big hug when you started oh great was it easy was it hard did they say what the hell are you leaving HSBC to do this yeah I had a great job at HSBC um and uh I’m very grateful to the institution it taught me a lot and it was actually a very honorable place to grow up um you know as an investment professional um I had a real conviction Robert that what I wanted to do was Focus just on environmental infrastructure and sustainability and crack the these big problems I didn’t want to have you know it was sometimes easier to invest in real estate or mainstream infrastructure I wasn’t interested to answer your question in easy I was interested in solving this problem but I also thought that would be incredibly valuable at some point if you could find solution to these difficult problems I had no concerns all long term um that it would pay off and it would be valuable for my investors myself um I think to answer your other question though um just to give you some of this um 90% of all of our scale um capacity and profitability has come in the last five years wow so that’s that’s that so we are the uh we are one of the you know longest longest burn overnight successes if you like in the in the sector it takes it it it did take a long time to build our footprint we did it the hard and slow way to answer your question we started building projects building by building project by project you know we went into hotels and tried to figure out why they were wasting so much energy with their lighting and insulation while the windows were open um we were doing this before the LED lamp had been rolled out popularized uh not in not in the science class when you were a kid but instead to actually light up the world there were only 2% of the world’s lights for Led when we got started to do our first make projects now it’s over 60% % of indoor sales so very different Market we started I mean in the the late ughs uh we were Consulting even to some of the world’s biggest brands about how to decarbonize their supply chain before this scope three uh you know sort of um designation uh even and look you know I spent time in China in factories looking at how to change you know uh Motors and variable speed drives and trying to implement technology that was looking working so it started the hard way of it really designing building projects on the ground inside buildings building by building and we got backed by the UK government in 2012 we became the first investe fund of the British government’s green Investment Bank when it was launched wow that helped us create the First Institutional Energy Efficiency fund to take our building by building approach and start to institutionalize it and create a business model that could be replicated it’s very far cited by UK PLC I think tobac us um and um you know s of grateful for that and and that was mimicked by um Singapore Ireland and the New York state governments who all invited us to set up funds specifically to do Energy Efficiency projects and deliver them as a service in those markets so by 20 I don’t know 201718 we’ done the first 10% of today’s footprint SDC which is um which is to build a series of projects and we’ve done it in the UK in the US and Singapore and and uh in in Ireland um and then uh we took our first portfolio public actually in 2018 we created the Europe the world’s first really dedicated uh Energy Efficiency Investment Company which trades to this day it’s called the sdcl Energy Efficiency income trust it’s a footy 250 company listed on the London Stock Exchange and it owns about one and a half billion pounds worth of projects that all do this kind of on-site generational Energy Efficiency so that was a major breakthrough from us uh but when we did the IPO up it that was 100 million pound portfolio it’s now one and a half billion pound portfolio Five Years on uh so five years ago five and a half years ago if I would have told you my 100 million pound plan was going to become one and a half 15 times 15x in five years you would have laughed um uh but you know that’s what we’ve done in terms of plans going forward we just want to take what’s working and scale it up because we think that the total adjustable market for making the Energy System more efficient is even bigger than the Renewable Power centor but you uh correct me if from wrong you were not developing nuclear fusion at room temperature technology you were taking technology that works and then convincing a data center or real estate company or a shopping mall how they can save energy by going this route correct it’s exactly right I mean it and what we were doing 101 15 years ago is similar to what we’re doing today um we take we identify things that work and then we incorporate them into institutionally structured projects that can deliver for commercial industrial public sector clients major benefits so um but you know look 10 15 years ago I I was walking around in supermarkets in Ireland right I won’t give the name of the major corporate for example just to spare their blushes but walking around in uh supermarkets looking at the opportunity to introduce LED lights with you know the the facilities man I just worried that it would make the vegetables look the wrong color and unattracted by the clothes the wrong color I’d go I I was doing LED lighting projects for the the highest end Hotel groups and they were worried that the banqueting facilities the dining room where the people were meant to be having dinner you know they wouldn’t it wouldn’t feel romantic because everybody would look white or blue or something like this from being like lit up by LED lights so I’ve been involved in this sector since things that worked weren’t really understood and sometimes what what’s needed is you need to come up with a solution of course the capital solution is we take away the capex and we deliver these projects as a service so customers don’t have to pay for them up front but there’s also a behavioral and a quality of service uh layer to that which is incredibly important you know how does the customer know that they’re going to get the light right lighting that their buildings are going to be the right temperature you know that their power is going to be available you know 8,760 hours a year you know all the time um and that’s the kind of thing that we’ve had to learn how to do over the course of the last 15 years we’ve now got 55,000 buildings connected to our projects around the world so um we’ve got a great sort of track record and reference basket to be able to get clients comfortable Robert but the good you’re absolutely right we’re not going out there and saying hey this might work try it out you know is is going to be great we’d like you to be the kind of beta test for something new we’re taking what works it’s just what works now last thing I’ll would say what there are some things that been working now which are really exciting yeah you know when I started there was kind of first first clean tech boom and bust what we call clean tech 1.0 in the late there was all sorts of fantastic technology I’m just getting super excited about it huge valuations that crashed but 15 years later is a much more sensible grounded Marketplace there’s still going to be bubbles but you know we’re finding amazing new technologies that they’re going to change the game solving problems that even we haven’t been successfully able to or easily able to solve how do you call data centers you know and now you can do that with you know Precision immersion cooling Precision liquid cooling in the way that you couldn’t necessarily do that 5 10 years ago how do you store Heat at 1500 degrees you know these are big problems maybe not you know at home but you know if you’re in an industrial facility how do you store heat you know how do you take non-dispatchable Renewables and store them properly you know either as heat or power or Co generate so I’m loving this innov Innovation stage of where we are in 2024 which is that there’s a lot of absolutely commercially proven Technologies but it reminds me of 15 years ago so what we’d like also to find as well as investing in projects is the new LED light bulb is probably the best way I describe it what’s the new LED lab it’s not that LEDs didn’t work it’s right sureal so if we can find that in Cooling in Motors uh things that most people would find mundane but we get very excited about because it’s the way the world works that’s the kind of thing we’ like to invest in as well as long as it works so we sure sure I get it but one of the the positive things that came out of the horror of the Ukrainian uh invasion is that suddenly energy became really expensive yeah and all of a sudden everybody could you know do with less because the price was so high so has that also Contin for you on the industrial side that I think yeah I mean it it woke everybody up I don’t think anybody in Europe was really talking about energy security before that Robert in America they’ve been talking about energy security for years which is why it’s actually been the biggest Marketplace most of our investment is in the United States right now um but that’s because they’ve always had an energy security problem um even though actually America’s been energy independent since 2019 um it’s always had a real problem and what the problem is actually been not war like it happened in Europe but the weather so the weather just keeps knocking out the gr New York superstorm Sandy 2012 uh more recently Louisiana Texas Florida you know these are huge catastrophic weather events and over the years what’s happened in America is that you’ve started to see industrial companies commercial companies public buildings wanting to put generators whether it’s solar or cogeneration or waste heat recovery whatever it might be generation of energy onsite because if the grid goes down it doesn’t matter and they can carry on operating it actually happens to be cheaper and lower carbon as well but it’s really about been about energy security and nobody cared Robert until about 2022 February in the Europe I was writing actually in January 20122 about energy security um uh and then in obviously in February 2022 the Russian invasion of Ukraine happened and all of a sudden a fundamental existential problem because Europe depends did 40% on and therefore for all marginal Demand on Russia by the summer almost all gas had stopped well coming in from Russia into Europe um not only did it push up prices dramatically at one point from about 22 Euros a megawatt hour which is more or less where we are now on natural gas to over 300 Euros that on whoa yeah so so not only did it have an incredible like hate the word unprecedented in post Co but an incredible run up in prices but the availability was the big shock like what are we gonna do because you can’t unfortunately 80% of the world’s energy is all gas and coal still you can’t run without gas Europe couldn’t can’t so what are we going to do said Europe you know um so there’s a big big availability problem storage levels are very low so you know Lessons Learned deep PL and land where are we here in 2024 in some senses there’s a bit of good news right gas prices are pretty much back to where they were in 2021 that’s not cheap but it’s much more affordable than it was before that but we still have huge availability problems and I think people really understand now that that price is can be extremely sensitive extremely volatile we’ve got to worry about where we’re getting the gas from this is by the way before we come on to do we want to spend the rest of our our lives on gas and I’ll come back to that and say but in the meantime where do we get it from do we get it from Kata do we get it from the United States United States is now a big one in parallel by the way we’re still taking gas still taking gas from from Russia in four countries including Austria and we’re still uh and we’re still actually taking atng into Belgium and Spain uh but that’s another story from Russia but what did we do so the European commission said and this is what was brilliant and really from our perspective absolutely brilliant point the European commission came out with the first one was well we’ll double down on Renewables we’ll build you know gazans of megawatts of offshore wind but of course when it was understood that that would take the minimum of 15 years and do nothing for energy Security in the short term another plan needed to be come up with and what they came up with was a plan called you know what it was called Energy Efficiency First Energy Efficiency first not second third also and they said um mimicking what happened in 2014 when Russia last invaded Ukraine with the annexation of Crimea the European commission then said every unit can I spend a moment on this every unit of natural gas they said that we don’t use is 2.6 units of gas we don’t need to buy from Russia every unit we don’t use is 2.6 we don’t need to buy from Russia why not every unit we don’t use as one unit we don’t need to buy from Russia and this is what’s so interesting why this efficiency story comes in so heavily then just to unpack it what the European commission was confessing is what I was relating to earlier which is the biggest dest secret of the energy sector that most of it’s wasted so what what this math just s of unpack it bit when you when you extract things like oil and gas you lose some of the primary energy the original Fuel and just in the extraction and conversion process getting it into pipes it’s roughly 10% the of the world’s energy gets lost by the way in that process of just getting it out and cleaning it up so it can go into a pipeline what then happens next is that let’s say in the electricity sector a natural gas molecule will go into a turbine typically that’s what the biggest provider of energy in Europe in the United States and the problem with that is thermodynamics if every unit molecule of natural gas you put into a turbine 50% of it makes it out as electricity the other 50% energy doesn’t disappear but it turns into something else it turns into heat now the problem is if you’ve got centralized energy plant so you’re generating your energy over here but you’re using it over there the heat it’s dumped it’s just lost in fact very this is the biggest source of energy loss in the world and unfortunately gas does it and so those nuke same it’s the same thing an prot and you get the same amount of so heat is lost it basically dissipates it goes up into the atmosphere uh quite a lot of it disappears into space where they don’t need it so by the time your molecules come out you’ve lost 10% you put it through an energy generator like a turbine you’ve lost another 50% so you’ve now lost 60% of the primary energy W but but it hasn’t left the power plant yet so if when it leaves the power plant it you get you send it through the transmission and distribution process and that will lose other five or 10% so by the time in the United States energy has got to the front door of buildings and now come on to what happens after that in a second according to the Lawrence Livermore National Laboratory which just been running data on this for the doe and in the world since the 1970s in 2022 the United States was losing 70% of its primary energy before it got to the point of use and in the UK if anybody listening is the UK If you take all energy sources used to make electricity in the UK um uh about 58% of it is lost and that’s because we’re a major electricity importer otherwise it would be worse so that’s an extraordinary feature and that’s before it gets to the point of view then when it’s inside the building I don’t know where you are at the moment Robert but but a lot of buildings don’t have the best lighting heating ventilation air conditioning insulation building management systems and control so they typically waste 10 to 30% of their energy so if you add it all together that’s why I say the world wastes about three4 of its energy going back to your point about Russia Ukraine that’s why the European commission said for every unit of gas we don’t use 2.6 we don’t need to buy from Russia because they know how crazy it is that all of this stuff is lost on the way so they came out with a new policy just called Energy Efficiency first and they said let’s do everything that we can to generate energy locally so it doesn’t need to be lost on the way if you are going to use natural gas at least use the heat instead of dumping it uh but do everything you can to generate energy locally through manable sources solar so they cut out planning uh problems associated with developing solar projects on commercial industrial public buildings across Europe uh they said you know use ground and air source heat huge heat pump stimulus programs associated in different markets um do whatever you can to decarbonize heat do whatever you can to reduce waste inside of buildings so European commission has grasped the npple and America also has to for the inflation reduction act so very grateful for the support that the doe has putting in there you UK is at C on this stuff at the moment but hopefully over the next few years we’ll do better but broadly speaking that’s what’s going on robt you know you’ve got this kind of energy security is what drove the inflation reduction act if you look at the reasons that passed it was not just because everybody or the Republicans were delited about things OB for the climate it was because it understood that energy security and effectively self-c consumption and self-generation was going to be an important part of the story um and it’s the same in Europe the reason we’ve got all of this shock and awe on how we deal with the energy system and con and the EU member states not the UK unfortunately is that there’s a fundamental understanding that after things like the Russia Ukraine crisis this has changed the way the energy system works rather the but all of the things you’re talking about about you know drilling hole in the ground and then processing it you know at a petrochemical plant that’s you know um that’s from there so what is being done for all of that energy loss of generating that primary energy to be more efficient because your focus more on once it’s produced the power and then we we work where the the the consumption is to reduce that how do we get the production actually more efficient um yeah I mean part of it is actually producing locally part is producing locally so you can um you can generate energy on site um using solar um combined with storage you can get it from the air or from the ground you can get energy from as I said even God forbid you’re using the gas pipeline you can at least not dump the heat so you can cogenerate will create power and heat and cooling at the same time you can take um an enormous problem that the industry has is it wastes a lot of energy through waste heat and waste gas best example I can think of is if you have a blast furnace it spews out waste gases if you got a Waste Water treatment facility it spews out uh and uh gases and what the a better solution to spearing out gases and polluting the atmosphere is to capture those gases and use them as fuel to drive turbines or create other forms of energy surfaces um so we have abundant technology that works to generate energy locally you know so even if even if you take a gas engine and you put it at least put it under a building so you can use all of the output energy you know you could operate that gas engine at 94 to 96% plus combined electrical thermal efficiency in other words double the way that the big units are feeding into the Grid in terms of output and efficiency perspective so if you have to use it you at least use it expensively but we now have incredible opportunities to use Renewables on site uh solar even in a I don’t know in in London at the moment it’s typically like it is it’s bit overcast a bit rainy but still in the UK it’s cheaper to generate solar on your roof than buy it from the grip so you’re an overnight success after 17 years um from 2007 but took your long time to probably more took you a long time to convince your family to stick with it rather than the your clients it’s always hard I have my biggest challenge is convincing my wife that what we’re doing is the right thing um so now that Energy Efficiency is number one and everybody is saying hey we got to call Jonathan to really scale this up uh are you able to manage all of this demand well we’ve scaled our business up pretty substantially so um at sdcl we have um offices in London and New York in in Dublin which is our new European headquarters uh in uh Hong Kong Singapore we built out our activities so we’ve got a pretty substantial uh business and team uh we’ve got at project level hundreds of people working for us fulltime in country in different markets like the United States Continental Europe um so that gives us a pretty big execution capability um but our job really at SDC is to identify the opportunities develop them invest in them and then Robert you know what we do in local markets is we find the best teams uh the best contractors the best delivery Partners the best we not we don’t sell widgets we’re not a Solar Company selling solar panels or a I don’t know you know somebody selling pipes or wires we’re out there finding the best technology in the market now our question that we ask ourselves the whole time is what’s the lowest cost lowest carbon most reliable solution to that energy problem and then we go out and procure it we get the best design teams locally we get the best you know engineering construction teams locally and we get the best operation and maintenance requirements in any particular Market if we need full-time employees to make sure that the estate is being managed on on site 247 we do that um but but but in parallel to that we’ve got contracts with some of the world’s largest energy companies to build and then operate systems for us so uh that’s how we’re basically getting scared it’s through trying to keep ourselves as as efficient as we can as a business but there there are constantly new innovation in technology you were talking about oop sorry about that you were talking about um um um um air conditioning yeah so European company has developed a circular air conditioning system that uses 90% less less um energy 90% And it’s circular yeah but not always the best management the technology is great how do you deal with that that here’s a solution that can scale and hotels have tested it wow this is great great but the management can’t are not the right people to make it happen yeah so I mean again challenge we’ve been dealing with for 15 16 years and I think the short story is you know it’s great having a really great technology but it’s got to be managed and solved properly and and sometimes sadly it’s not always the best technologies that win but it’s it’s the technologies that can be relied upon and deliver the goods so um what we’re typically doing there is we’re Contracting with large companies Robert that can that can uh guarantee the to us the performance the availability the reliability the efficiency of the underlying system so that we can then pass that the benefit of that guarantee on to our clients who for whom we’re delivering an energy service if it’s a small technology smaller technology company that can provide a product into the larger company that they can then give us Comfort that’s great um sometimes if it’s a small or medium size company that has a great technology and great management and there’s an strong enough warranty and guarantee package that the the product or the service is going to work and if it doesn’t that we’ve got the course to make sure that we can deliver the goods ultimately for our customer then we’ll do that too but it’s it’s got to be and and and and you know great technology great idea might work in the future is very interesting but it’s not fit for purpose for our infrastructure program do you do you also look at Water efficiency or is it only energy yeah so I the interface between water and energy is is a big one so we do um you know we’ve we particularly interested I mean the the simplest way of answering that question is there lots of energy technology that use less water so we’ve invested in a company recently that does um Precision immersion cool Precision liquid cooling um and one of the great benefits of it is it not only does it reduce the energy footprint of a data center that it calls by about 50 60% but it can reduce the water consumption by 80 to 90% so sometimes you’re not actually investing in the water or the Water Production but you’re investing in something that dramatically changes the way that that can work likewise you know things like variable speed drives and motors and pumps and other forms of assets that interact uh with the water sector of course looking at Water wastewater treatment facilities is something that we’ve done a lot of we we currently own the uh gas grid for stockhome which is actually biog gas field um rather than natural gas Fiel it’s where it’s all biog gas and that biog gas comes off the back of wastewater treatment facilities that would otherwise be polluting um so you actually invest in the company I thought you were you were mainly doing infrastructure Solutions yeah for industrial we do we do so about 90% of what we do at the moment is about investing in projects you’re right infrastructure and that one which is stome gas quid is a project at the end of the day it’s taking those flu gas those waste gases off the waste water shink facilities and piping them around to be a more sustainable solution for gas usage uh in commercial industrial uh home and frankly transport um in in Stockholm um so that most of what we do is Project based but we actually do invest in companies as well um so uh we we will take stakes and we do take stakes in particularly for growth Capital we that really where we’re focused it’s companies Robert as you to the point you made they’ve got a product that works or a service that works one of the ways that you can tell it works is it’s making money either either generating revenue or profits or very close to profitability it’s called proven capability in the field it’s make solving a big problem we can add value because we’ve got lots of clients around the world that might be able to use it we’ll typically try it before we invest in the company but if we do invest in the company not only are we a root to Market but we can also turn that product into a service so for example uh rare earthree energy efficient Motors we’ve invested in a company like that and in due course we want to deliver that as a service to customers rather than asking them to pay for the motors same with our Precision liquid cooling business you at the moment clients are buying it for data centers but if they want to procure it as a service they can with us you know and so on we even did something like that in the electric vehicle charging space where we provide um fast charging infrastructure for the huge charge Point operators like BP but we have a stake a corporate Equity stake in the development company that puts those together so that we can benefit and partner with them on that Journey who who typically is your investor in your funds in your various funds and projects it’s mostly institutional investors um but we’ve got two different types of fund or Investment Company under management one is public so if you the the public company the sdcl Energy Efficiency income trust um uh is listed on the main Market of the London Stock Exchange um and that is largely institutionally owned but there is a big component there of um uh Private Client investment uh whether through directly or through wealth managers um so that’s um that’s a you know that’s a designed to be a a vehicle through which um individual investors and you know as well as institutional investors and family officers can invest in a London Stock Exchange listed relatively liquid investment that they can buy and sell uh it pays a dividend um and um you know I think a really exciting company um I’m invested in it myself um and then we also run um uh private investment vehicles those are typically what more geared to it to larger institutional investors um so whereas there is no substantial minimum investment size for the public company listed in London obviously it’s just an ordinary share you buy and sell in the mar the the the private funds typically have a five1 million minimum commitment uh on average our investors are investing somewhere about 50 to 70 million um as per per investor and the invest the type is institutional so it’s Pension funds insurance companies um asset management groups couple of softare entities that are investing with us do you also look at mobility issues like shipping in Energy Efficiency in the shipping industry yeah so we are looking at that market we haven’t um we haven’t got an ex an existing investment in the maritime sector right now but it’s something that we’re extremely interested to do um so yes it it’s going it’s big Focus for us right now in terms of looking at how we can do that in the in the mobility sector right now we’re the I think we’re one of the largest investors in fast charging electric vehicle infrastructure okay um so a lot of those big BP pulse facilities being put up around the country the one in in Birmingham which is the largest in the UK second largest in Europe that’s uh that that we finan that um so we’ve started in fast charging electric vehicles um for uh you know where we’re providing the fast charging infrastructure for the BPS of this world and absolutely we want to move into other sectors including but not limited to Maritime but you you’re you’re the vast majority of your investment is in North America and in Europe corre because you had offices in Hong Kong and and Singapore yeah so we’ve got um we’ve uh you’re absolutely right I mean we we’ve uh ironically although are real activities in Energy Efficiency started and we learned our trade on Factory floors in China um our first projects were delivered in London and uh in and in New York and and and in Dublin so we have grown our practice to be almost entirely focused for a period of time on those markets so U about 55% the United States um about 30% is in Continental Europe so the bigger EU member states uh about uh 10 or 15% here in the UK and and we’ve got a small Investment Portfolio that we’ve built over the years in Singapore and in Vietnam we’ve done uh you asked about heating but you know we’ve done cooling as a service for industrial companies we’re doing rooftop solo as a service for big multinationals in Vietnam um and I think other than our expansion or of our private Equity business Beyond infrastructure which is a strategic move for us across the group another area which we’re going to be more focused on I would say in 2024 than we have been for a quite a long time is the Asia Market because we see a huge opportunity to grow in in that in in those markets particularly the Asian markets so Singapore Vietnam where we’ve got existing footprint presence but also expanding into adjacent markets night Mania are you are you I mean the the scale of of growth grow and money flows is dramatically increasing Energy Efficiency first is now the the EU t-shirts and their their magga cap um are you optimistic or pessimistic that we will have enough bandwidth to turn it around because it will also impact obviously climate if we’re burning less you know I I I’m incredibly optimistic um and can I just put it another way around to be a bit um contrarian for a second um if if if if the if we were going to be focused entirely on building R Renewable Power capacity um I would be quite pessimistic and I’ll explain why not that I don’t want that to happen I won’t be doing it within our portfolios but if that’s what we’re relying on we’re not going to get where we need to um and and you know just to put things into context that’s that’s been the basic plan for the last 20 years years Robert could by the way you know to disagree with me if you like but going over the last 20 years the world’s invested $6 trillion dollar in Renewables about3 trillion do in the grid to enable them so around 9 trillion do which is fantastic and I’ve been part of that and it’s been the best I love going to Cops these days because it’s got 70,000 people rather than 70 it’s it’s incredible it’s exciting it’s brilliant but if you look back unfortunately over the last 20 years what’s that $9 trillion done if you Mar about climate nothing not really I mean you know two parts per million have been added to atmospheric CO2 concentration every year for 20 years except one year where it went up a bit okay the total install capacity if you compare it to the energy the global Energy System of things like wind and solar is still less than 3% 82% of the world’s energy is still oil gas and coal and although the growth rates associated with Renewables dwarf the growth rates associated with let’s say conventional energy like fossil fuels the scale of the the fossil fuels unfortunately is swamping the incremental growth of the renewable energy sector I’m not don’t mean to be depressing I said I was optimistic no no but but this is a real Challenge and by the way to build the Renewables we need time it takes time we de we build Renewables too but it takes years and years to get from concept through planning to construction to commissioning um even for small onshore projects asore think 10 15 years onshore think three to five years so we’ve only got six years of carbon budget left Robert so you know time matters right cost matters it’s enormous amounts of money that need to be invested in this stuff and the other thing that matters which is another problem is resources resources matter to make windmills and sorry wind farms and solar parks the rest of it takes a lot of metals and minerals and critical um metals and minerals to boot it takes 15 years to build a mine it’s going to take a lot of copper and nickel and magnesium and the rest of it to build all of this stuff um so the actual resource intensity the mining requirements the social and environmental impact associated with blowing up the mountains to deliver that all things that we need to do in the right way are going to take a lot of time money and resources and even if we did all of that it’s very difficult to see how that’s going to solve the problem on its own and just I’m going to complete the depressing bit and come to the optimistic bit because all of that really has got to do with Renewable Power and electricity meaning in other words know eism for power but the electricity sector is only 20% of the world’s Energy System today we’re about a third renewable in electricity where it’s working so to Green the electrical system you’ve got a triple or quadruple or the the global capacity when rable energy sector Renewable Power sector but then you only dealt with 20% of the problem the other 80% of the problem is all the trans fuels and the Heat and gas and the the rest of it so we’ve just got this incredible it’s not that we I not that I don’t think we’ll get there but I think we have to be like honest and realistic about how long it’s going to take how much money it’s going to take and how much resource it’s going to take it’s going to take decades and trillions probably tens of trillions of dollars and incredible levels of resourcing in order to do it let’s let let’s go down that path but if we the problem is if we look at how much time money and resource it’s going to take we need to do something in the meantime and this is what makes me most optimistic because if there was nothing much we could do in the meantime I’d be really pessimistic oh my God what are we going to do but there’s so much we can do in the meantime because we’re wasting three quarters of the world’s energy I mean what an Incredible Gift we’ve been given in climate solution that that’s something that we can go after so instead of necessarily Building 100 units of new capacity maybe only we need to build 25 units and maybe in the meantime we can we can start to get to work on cutting out that all those levels of inefficiency along the way and maybe by doing that we can make huge strides on carbon emission reduction which at the same time save us money and at the same time improve energy security and that’s why the the United Nations cop 28 Debby agreement twined Energy Efficiency with renewable as the first call to action of all the 198 member states it’s why the Energy Efficiency PR program has been introduced in Europe it’s why 20% of the inflation reduction act has gone towards Energy Efficiency not because it’s a nice cuddly fluffy thing but because it’s actually the largest fastest cheapest and cleanest source of emission reductions and save money and improves the security of Supply so for all of those Reasons I’m massively optimistic because although we’ve spent nine trillion on Renewables we are yet to start to get really serious about the efficiency program and I think that is a abundant uh source of um gain and I’m super excited about it I I I share um your thoughts on that because believe it or not a lot of people don’t know I used to work on oil rigs in Iran in North Sea and France and Texas and you know I I know what it is to make a hole in the ground you know and I know how comfortable it is just to open up the pipeline and make your your bonuses and in a couple of weeks we’re doing uh to come to come back to what you were saying about the the challenges we’re doing a a master class with a guy named Simon Misha which you might have heard of him so he’s like an ultra nerd that did a thousand page report studying he’s a mining expert how much stuff do we need to execute on full electrification and he said it ain’t there yeah it’s not it’s just not 20 times increas in Copper production just copper so he’s and he came up with other things but if you’re you’re right there are big big uh challenges but I agree with you it should not stop you from doing what you’re doing now will we get there in time I’m not that optimistic that we’ll be able to offset um the climate I’m still more of a fan of biodiversity Focus because it’s cheaper and quicker but there’s no unicorns in biodiversity that’s why the investor doesn’t like it I say in my book it’s not about all of this or all of that it’s all about Renewables it’s all about planting po it’s about all of it and I’m not saying that Energy Efficiency is going to be all of it I’m just saying I’m being say that it’s at least as important as the rest of it and it’s a low hanging fruit yeah you know and to you you ask me the question before is it easy or hard it look you want to do it properly you want to do it at scale it’s hard yeah but you know that’s fine it’s fine you know some some of the most valuable things in the world are the hardest to get that and deliver but you know the payoff is um think about it like this if the UK government really got to grips with the fact that it was wasting so much energy and producing electricity let alone the rest of the energy system in the UK uh what an incredible opportunity to save not just carbon but also money yeah you so I give you an example little little example that’s close to home for everybody is the health service so we all you know we all unfortunately human beings and depend on the thing but it’s it’s the L Health Service in any country but definitely in the UK is largest energy user public buildings by the way use about 14% of the UK’s electricity and I didn’t know but the biggest energy users the NHS was about four five% so how about this most of that energy is being wasted now you know every time I turn on the television I do not hear that the NHS has got too much money and it doesn’t know what to do with it not why not blow it on excess energy in fact it’s the opposite any money so what’s it doing wasting energy why is there almost no on-site generation why is it why are about 60% of the the lights in the NHS yet to be even changed to LED which is the lowest hanging fruit as you would call it so you know there are things that we can do which will make a dramatic difference that are actually cost effective as well as reducing carbon footprint and improving security um so you know I think the if if you think about that government level what happens if you’re a coite Robert or what happens if you’re a a data center operator or uh what happens if you’re in wearing warehousing business or any kind of commercial if if what you’re doing is wasting energy yeah and could be using less to do the same more more what an incredible competitive Advantage opportunity what an Incredible cost efficiency opportunity and the last point of my rant is for fun if you want to know why this this isn’t being addressed um think about this energy is the one of the largest overheads right for government for commercial industrial companies have you ever ever heard of a chief energy officer no so you know I think like like Europe wasn’t really awake to the concept of Energy Efficiency a couple of years ago go I remain optimistic not only is this the biggest problem that can be solved but that actually through this kind of conversation through the Investments that we’re making through the deepening understanding about what needs to be done to the Energy System um that better energy management and just doing the same or more with less um is going to take a even greater hold on the way that um business and government works we’re we’re coming to the end and I promise I would keep it to 60 minutes cuz you have a really important meeting uh after this um what can we do to help you so I that’s an amazing question I mean three things one of which is I just think the theme the narrative around deficiency and resource efficiency whether it’s around energy or anything else but I mentioned the amount of food water that’s wasted faction that’s wasted it’s all the same thing but I you know I think I love having a forum like this through which we can discuss this fundamental problem that needs to be solved too often the problem is discussed is how do we get more solar or batteries or hydrogen or whatever it is out into the market that’s not the problem the problem is how do we solve the actual problem which is that too much carbon is being emitted or too much cost is being run we don’t have enough energy security so first of all this sort of discussion and popularizing an opening widening the debate which is why I do things that are non-financial like right books speak as much as I can on TV and on the radio and podcasts newspapers whoever will listen to me my wife won’t but so that’s kind of the that’s one of three things the second thing is we are always looking to engage with major corporate industrial and public sector counterparties so anybody uh that’s listening today or that’s within the TB Network that represents an a heavy end user of energy and that has an interest in how to do the same or more for business with using less energy we would love to engage with and we have a big team and a huge um interest in and frankly balance sheet to help address those problems and then the third one is investment um I mean we manage funds once listed on the London Stock Exchange and we have other private funds we are almost always out there looking for um to scale up our business and that relies on two things more projects and more Capital so we will always welcome discussions with investors interested to support what we do Jonathan I really appreciate your time and also I need to mention something to show what a mench Jonathan is we had originally planned at three but he forgot he has to go to see his Child’s Play so he asked me could move that and I found that a great reason to move the time because most you know most of the financial alpha males are not really focused on going to their children’s place so that was a great reason to move it and I really thank you for taking the time today well can I just say thank you and thank you thanks to everybody else for accomodating that Char Char Charlie Maxwell is is is playing little bear oh good in Goldie dox the Three Bears today and he’s eight years old and very excited about much much more important than ranting or talking to us so thank you so much for doing this and if there’s anything that we can do to help you let you know and at 4 o00 we have the virtual mixer you’re welcome to join but I know you’ll be busy with the play so and and I hope to see you soon I’m not sure when but hopefully soon stay and thank you for all your great work well thank you thank you for listening to it thank you very much you stay well everybody see you all at four o’clock bye bye
Jonathan Maxwell, CEO, Sustainable Development Capital LLP
Jonathan is the founder and CEO of SDCL and chairs the Investment Committee for the FTSE250 investment company it manages, SDCL Energy Efficiency Income Trust Plc (SEEIT). He has over 25 years of experience in international finance, infrastructure, and private equity. Since establishing SDCL in London in 2007, the group now operates across the UK, Europe, North America, and Asia and has specialized in investing in projects and companies focussed on efficient and decentralized generation of energy (EDGE).
He has advised and invested on behalf of several national governments as well as a wide range of institutional investors. Before establishing SDCL, Jonathan was at HSBC Infrastructure and managed the IPO of the HSBC Infrastructure Company (HICL), the first Main Market, London Stock Exchange-listed infrastructure investment company.
At the end of August this year, Jonathan’s book, The Edge, was published in the UK. It is a contemporary look at how the world has been transformed by recent events, focusing on climate change, the war in Ukraine, the next resource flashpoints, and the challenges the world faces around energy, security, the environment, and the economy.
What will you learn?
How much money is needed to finance the energy transition
What is preventing institutional investors from financing the energy transition
Will fuel free energy reach the scale we need in time to prevent climate change meltdown?
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