What the $1 trillion infrastructure bill means for clean energy PE investors

GPs investing in sustainable infrastructure talk about the under consideration $1 trillion infra bill.

Happy Tuesday, folks

A UN-sponsored climate change report released yesterday estimated that the earth will heat up by more than 1.5 degrees Celsius by 2030 – a time threshold much sooner than expected. This equates to many more droughts, floods and fires in the coming years – a scientific byproduct of global warming. (IPCC Report here.) 

The $1 trillion infrastructure bill that’s likely to pass this week proposes changes in systems that can possibly alleviate the situation. The $85 billion funding for electric vehicle charging infrastructure is a big one.

“If significant houses plug in their cars that’s a major demand for clean electrons,” said Adam Bernstein, a managing director at North Sky Capital. In other words, a push for electric vehicles creates a major demand for clean sources for electricity –solar, wind, hydro and more. 

For Bernstein, who makes direct investments in sustainable infrastucture projects, the infrastructure bill is a win. “It increases the opportunity set,” he explained.

Even though the infrastructure bill is not a climate bill, it does recognize the crisis. The bill grants money to things like carbon capture technology which dumps CO2 underground, public transportation like Amtrak, and grants more power to the Department of Energy.

But Bernstein doesn’t expect this bill to change what North Sky invests in – it just grows the market for renewable energy.

Same goes for green infrastructure investor Scott Jacobs, who’s the cofounder of Generate Capital – a firm that raised $2 billion in July for sustainable infrastructure investments.

“We will take input from the policy environment but won’t depend on this for our investment strategy,” Jacobs said. For Generate Capital, the deal flow depends on the local communities and the customers and not the bill.

“We are active in the community solar market and in the bio-digestion market –taking food and animal waste and turning it into energy.”

On a broader level, Jacobs thinks the bill in one way is woderful as far as it goes: “It ensures we don’t further ruin the climate but it doesn’t recognize that we need to expedite climate solutions.”

Unlike traditional PE firms, Generate Capital raises capital by selling stakes in the firm to LPs, pension funds, etc.

More recently, Stonepeak Partners raised $2.75 billion for a fund solely dedicated to renewable energy investments.

What do you think about the infra bill and will it influence your investment playbook in any way?

Write to me at karishma.v@peimedia.com with your two cents, along with any other feedback, tips or gossip. Have a great week ahead!