Hans Kobler, founder & managing partner of EIP

Hans Kobler, founder and managing partner of Energy Impact Partners, sees undimmed investor appetite for climate themes. With nearly $2.7 billion raised by the firm in the past five years, Kobler evaluates the opportunities EIP sees to put this capital to work.

Did you find that fundraising slowed down over H1 2023 compared to 2022? For what strategies (eg, by asset class, theme) and types of investors?

The fundraising climate this year has undoubtedly been dimmed. Managers and allocators are being more conservative in where they are placing their bets across the board. That said, interest in the energy transition has never been stronger. Corporates across all sectors realise they need to have a strategy on net zero. Financial investors are going beyond their small impact allocations, realising the generational scale of the energy transition, and want to put real money to work. Investments in our sector surpassed those in traditional energy for the first time ever, with $1.1 trillion, further fuelled by the Inflation Reduction Act.

We have seen that interest first-hand in our fundraising and closed four funds in the last year. From our Deep Decarbonisation Frontier Fund to our European Flagship Fund, our Credit platform to our Elevate Future Fund, interest remained strong across all asset classes and regions from both financial and strategic investors.

Has the political ESG backlash in some US states affected your fund?

We don’t think of EIP as a firm founded in ESG, but as an impact firm that strives to help our partners on their journey to net zero, address climate change and seek returns from investment opportunities with a unique business model. Most of the political backlash with ESG is around greenwashing but it’s not just a buzzword. Those that think it is are missing opportunities. At EIP, because we work with incumbents, this isn’t lip service to us, it’s rooted in fact and it’s not swaying with public opinion.

How has the scaling and mainstreaming of impact investing affected your business – is there more opportunity or more competition now?

We think this is a good thing and feel that the opportunity set is massive. Last year alone in the sectors we track, more than 10,000 companies received an investment of $1 million or more. Transforming the global economy needs innovation, incumbents and capital to come together. Corporations from all sectors realise they need to have a net-zero plan for their board, investors, customers and employees. They also realise that decarbonisation is hard and working together with innovators through capital allocations could aid their path forward. It took financial investors a long time to warm up to the opportunity but now they realise we are at an incredible inflection point of a $150 trillion rewiring of the global economy.

This of course attracts capital. More and more corporates are setting up corporate venture capital arms, generalist PE firms are warming up to our sector, infrastructure investors are starting to realise that new climate technologies are enabling billions of dollars of deployments and energy investors are reinventing themselves as transition investors.

Which impact themes and strategies do you consider most exciting and untapped?

Areas that are enabling an intelligent infrastructure and deal with the massive peaks of an electrified clean infrastructure and provide reliability and resilience to commercial and industrial customers are high on our list.

We are most excited when we find opportunities that accelerate our partners on their net-zero journey, while delivering great returns for our investors. These generally go hand in hand. We pick what we believe to be transformational technologies and introduce them to our  incumbent strategic partners and investors to advance decarbonisation.

We like to look for the more difficult problems to solve, ones that others may shy away from, because we have the experience and expertise to deeply understand how those problems can be turned into opportunities.

Which impact themes and strategies do you not plan to invest in because they are already well-capitalised?

We like to look for the “hidden gems”, where the unit economics and prospects are strong and defensible, but perhaps not yet discovered by the market. For example, we shifted our perspectives on mobility when the market turned frothy and never got comfortable with commodities like mass manufacturing. We have seen valuations drive up considerably in the opportunities that are direct beneficiaries of the IRA. We take a cautious and diligent approach in what opportunities we choose to invest in, but overall, see the IRA as a game changer for the US.

Do you use benchmarks to evaluate your impact? Is it a useful exercise?

Impact and its measurement are a critical component to our mission. We measure and offset our own footprint, and most importantly, we track the actual and potential impact of many of our portfolio companies.

Some of our partners, such as Microsoft, Nysno, Xcel and APG, work on our ESG Advisory board to help set standards and advance our impact.

How will the development of generative AI affect your strategy? Are you planning to use GAI as a resource in your business?

Generative AI will transform how we operate. Many of our portfolio companies are already leveraging it to great effect by creating innovative solutions or harvesting tremendous synergies in software development. It will also add a tremendous load to the electric infrastructure that is already pacing towards doubling over the two decades to come. Some say it may require us to even triple the electric infrastructure (which has seen flat demand for 20 years and was built over the course of a century), which will create a greater need for investment and innovation in our quest for net zero.