Q: How has the energy transition narrative evolved in recent years?
SL: It is not just a change in the narrative. There has been an existential change. I started out in the energy sector 15 years ago. Back then, the world was totally different. Energy transition wasn’t even spoken about.
At Meridiam, we are well placed to help contribute to that transition. We launched a dedicated fund to energy transition five years ago. Throughout our 15-year history, we’ve already developed a very advanced policy and methodology towards impact.
We’ve recently become a mission company, a benefit corporation under French law, built around three of the UN Sustainable Development Goals: goal nine, about resilient infrastructure; goal seven, which addresses affordable energy; and goal 13, focused on climate action.
Every single investment we make, every single action we take in asset management, is now governed by those principles. My point is our engagement runs far deeper than a question of narrative. For us, impact is at the core of everything that we do. Impact is our business philosophy; it is part of our DNA. We have demonstrated that you can measure and achieve impact, generate attractive risk-reward return for our investors and create highly positive and long-term solutions for communities simultaneously.
Q: Why did you take the decision to raise a dedicated fund?
SL: The Meridiam transition fund was pre- pared as a contribution to COP21 with the support of French investors, including a large life insurance company as seed investor and launched just after the Paris agreement had been reached. The question in everyone’s mind was, how do we make this goal a reality? That was the impetus behind the fund. The objective was clear: demonstrate that it is possible to invest in new energy transition sectors beyond traditional renewables. This requires more flexibility than a traditional infrastructure fund. For example, Meridiam Transition can invest in small projects with no leverage, by aggregating projects and creating platforms.
Q: And where do you think energy transition investments can prove most effective in doing that?
SL: Our energy transition fund successfully invested across three major areas – models that we think will help make the energy transition possible. First is resiliency of the electricity system, which is one of the biggest challenges that exists today when it comes to incorporating renewables into the grid. The second is biogas and the circular economy. The third is supporting the evolution of smart cities, energy efficiency in buildings and electromobility, an area that generates a lot of excitement but is harder to deliver.
Q: Within those three sub- sectors, what are the most interesting investment propositions that you see?
SL: We have 9 projects today within this specific energy transition fund. Some involve highly innovative technology, like our demand-side management platform Voltalis. Others involve more traditional infrastructure, but the way that we have approached such infrastructure has been original. For example, our biogas cogeneration plant in Mayenne (France) is a project that has brought 113 farmers into a joint venture with us to provide green gas. This unique arrangement has proven both effective and successful. In fact, there was such interest in the project that we decided to launch a crowdfunding initiative around it, which attracted more than 500 individual subscribers, including many locals who wanted to contribute and support the project.
In the electromobility and smart cities space, we acquired Allego, now the leading European player in electric vehicle charging.
Through other funds, Meridiam has invested in two waste-to-energy plants, in Poland and Spain, contracted with Iowa University to address its energy, and sustainability goals for 50 years, and contracted with the city of Espoo in Finland to create healthy and functional educational premises throughout the city. Our Africa fund is also partially focused on energy transition, with investments including the Tulu Moye geothermal project in Ethiopia.
Our investment platform NEoT Offgrid Africa distributes solar kits to African households at a competitive price.
Q: How would you describe the evolution of investor appetite for the sector?
SL: Investors care deeply about value creation, both financial and non-financial. Many of our LPs want to be sure that we are monitoring our impact in addition to providing the return they expect. To this end, we have developed several proprietary methodologies: in particular, a methodology to monitor and measure impact, of each one of our assets, as well as a fund, portfolio or sector view within the framework of the applicable UN SDGs. This is quite unique and pioneering.
Q: So, what does the future hold for energy transition and what opportunities is it likely to bring?
SL: I think opportunity is absolutely the right word. We like to have the ability to commit alongside a developer or SME and help that company grow through innovation. For example, we developed and invested in a black pellet production unit combined with a biomass cogeneration plant in France, the first of its kind in the country, contributing to the circular economy because the by-products of black pellets will be used to fuel the biomass cogeneration plant whose heat is partly used in the pellet production process.
The black pellets can replace coal and will be used by district heating network operations.
There are also opportunities to shape the way that countries and cities operate, and we are working on ways to increase the resilience of cities.
There is agreement that the new world will be decarbonised and digitised. But beyond that, the pathway which takes us from the past to the future is not set in stone. It will require the mobilization of technology, organisational shifts and real innovation to get us there. We have the opportunity to be first movers in this space and really invent something, which is extremely exciting!