Ceres’ Clean Trillion campaign aims to increase clean energy investments globally by $1 trillion a year, in order to minimize the damaging impact of climate change. Part of that campaign is a series of interviews with investment leaders who are paving the way. This interview is with Nancy Pfund, founder and managing partner of DBL Partners, a venture capital firm based in San Francisco.
DBL Partners has an ambitious goal of investing in companies that deliver top-tier returns while also yielding environmental and social benefits. From a clean tech perspective—with Tesla, Solar City, and Off-Grid Electric among your investments—are you feeling bullish today about achieving these dual objectives and do they require more patience than is typical for a VC firm?
Nancy Pfund: DBL’s mission of investing for both financial and social returns is getting more relevant every day. Investors from pension funds to endowments to family offices, foundations, and strategics increasingly have sustainability front and center. DBL has been a huge beneficiary of this trend, and its investments are helping to show the world that now is the time to create the twenty-first century’s iconic corporations designed with twenty-first century needs like climate change in mind.
In our asset class, venture capital, patience is required no matter what the sector. Taking on incumbents doesn’t happen smoothly or overnight. While clean energy investing has its share of volatility, the progress we are making is undeniable as we move toward higher and higher penetration of renewables, electric vehicles, efficient buildings, and now energy storage.
While the state-by-state regulatory structure in the United States is an expensive attribute with which companies in this space have to contend, the reward is that when progress is made, the public pays attention. This makes for outsized return potential, both in terms of investors and society as a whole.
You have predicted a transformation in the energy world in the next decade that will change entire industries, including electric power and transportation. Why are you confident about this transformation?
This energy transformation is driven both by attractive cost-performance curves and growing consumer awareness and demand. It is this combination that makes it so unstoppable. No longer do consumers need to sacrifice performance for green credentials, and increasingly they not only don’t need to pay more, they may pay less.
Going forward, the opportunity will grow to store your power from your solar panels to use at night or as backup, and charge your car according to the cheapest rates with the push of a button. All of this taps into what consumers want today.
Along the way, we can re-invigorate quality job creation and manufacturing, creating jobs that are accessible to a wide variety of Americans.
I’m especially intrigued by DBL Partner’s recent $10.5 million investment in Off-Grid Electric, an off-grid solar company that is entirely focused on Africa. This is DBL’s first investment in Africa. Why Africa and why now, and how did lessons learned from your domestic clean energy investments inform this investment?
Our investment in Off-Grid Electric is a logical progression of both DBL’s mission and our investment focus. There are currently over 1.4 billion people who live without electricity; over 600 million are in sub-Saharan Africa. Without fixing this electricity gap, building a middle class and improving quality of life will remain off limits to regions of the world that are slated for some of the highest rates of population growth over the next generation.
In 2016, we simply can’t sit by and let this happen—we need collective action and we need to extend the benefits of an entrepreneurial approach to regions that are now ready to launch. At the same time, in bringing electricity to millions of people, we don’t want to, and don’t have to repeat some of our twentieth century models that no longer work.
Costs of solar and storage and energy efficiency devices are now in reach for many Africans, and can replace dirty and unreliable fossil-based solutions. The widespread use of mobile phones in this area of the world also allows for frictionless payment models, another leapfrog effect that allows Africa to define its own future and augment its entrepreneurial profile.
These are the reasons to use the lessons we have learned in U.S. clean energy markets and apply them to a new market like Africa: the return potential is significant and the opportunity to shape a more prosperous and healthy future makes for one of the highest-impact endeavors of our age.
Seven months ago, 196 countries forged a historic global climate agreement that calls for dramatic reductions in greenhouse gas emissions to stay below the two degree Celsius threshold. Has this agreement changed the playing field materially and if so, how?
The Paris agreement has played a major role in shaping the way we think and talk about our future. No longer is it a question of should we do something to combat climate change. Now the assumption is that we all need to work together to make this happen.
The Paris talks incorporated real world technologies and business solutions that can play a role today, rather than just setting far off goals that may or may not be achieved. The recognition of the role of innovation to get ourselves out of the climate dilemma we have created was extremely important. Investors are taking notice and a new crop of innovations and startups are being funded and will continue to be funded in the future.
Ceres’ Clean Trillion campaign seeks to boost global clean energy investment by an additional $1 trillion a year. Investment levels today are tracking at $300-$350 billion a year. What must change to accelerate investments in this space at the pace needed to avoid the worst impacts of global climate change?
In order to fuel more investment to achieve Clean Trillion goals, we need more successes, and more visibility for these successes. We need to celebrate pioneers like Tesla, SunPower, SolarCity, First Solar, as well as the new entrants that are sprouting up in all sectors and geographic regions. These are the kinds of companies our young people want to work for, and we need to help raise their visibility and help them out because they are dramatically underfunded compared to century-old incumbents.
Nothing attracts investors to a sector more than seeing that others have been able to make good returns. We also need to take more risk in funding the investment managers who want to do this work. Billionaire business leaders play a major role in promoting more investment, of course, but often the next big thing will be found by someone you’ve never heard of and who needs your support.
Big philanthropy and business players can help support these smaller players—this is central to how innovation occurs in all sectors. In order to fuel more successes, corporations also need to step up and initiate more pilots and purchases of products and services offered by new entrants, as these are critical moves that allow young companies to “cross the chasm” and attract follow-on investments.
If you could fix one thing in the energy sector today, including on the policy front, what would it be?
If I could fix one thing, it would be to put an enforceable price or tax on carbon.
Likewise, what one thing do you think must change in the investing space overall—not just for impact investors, but for large institutional investors such as pension funds—to go to scale?
Investors should learn from those who have managed to be successful in this space and work with them to craft an investment approach that is informed by experience and expertise. It’s time to move beyond studying the investment sector and just jump in!
Fossil fuels played an essential role in the unprecedented economic growth we experienced in the 20th century. Now we are living with the consequences of relying on energy sources that are both finite and devastating in their impact on our world’s climate.
The transition to sustainable energy is an imperative requiring enormous amounts of capital. Skoll awardee Ceres predicts that annual investments of $1 trillion are required through 2050 in order to limit global warming to below 2°C and avoid the worst effects of climate change.
Farsighted investors, like Nancy Pfund’s DBL Partners, are leading the way. In this interview with Ceres, Nancy describes exciting opportunities for private equity to fund the innovations that will replace our dependency on fossil fuels. We’ve moved beyond the opportunity stage. Successes are being realized and momentum is building. The transition to clean energy is a sure bet, and as Nancy says, it’s time for more capital owners to jump in.