Grow 1-on-1: Sustainable Investing Professional
Chatting with Jeff Schlichting, Principal at Equilibrium Capital
Foreword
At Grow, we’re always interested in delivering our community a sneak peek into the lives of other professionals whose values, expertise, and concerns match our own. One such individual — Jeff Schlichting — is the father of one of our very own writers, Nicole Schlichting. Recently, Nicole sat down with her father to chat a bit about his experience (link to bio) in both the renewable and the sustainable investment industries. The following transcript from their conversation, enjoy!
The Interview
Nicole: Alright, to begin, I just want to say thanks for joining me here this evening in…your house, Dad.
Jeff: (laughs) My pleasure, Nic.
Nicole: Okay, let’s get started: what do you do?
Jeff: I work with Equilibrium Capital, and our focus is to innovate and manage sustainability-driven real-asset investment strategies and products for institutional investors.
Nicole: Well…that’s a lot of big words.
Jeff: (laughs) It is a lot of big words — it’s a mouthful.
Nicole: Many members of the younger generations (including myself) are not acquainted with the jargon of the investment world — can you break that down for us? What is it exactly that you guys do?
Jeff: Right, well, Equilibrium invests capital on behalf of ‘institutional investors’, and that typically means pension funds (both public and private), insurance company funds, and sovereign wealth funds (countries that have set aside money to invest), as well as other larger investors like endowments, foundations and large family wealth pools usually called “family offices.”
We invest in ‘real assets’, meaning physical assets rather than financial instruments or tradeable securities, and we invest with a focus on sustainability.
So the sectors in which we invest are the things that people really need; we need shelter, and so Equilibrium invests in LEED-certified real estate. We need food, so Equilibrium invests in agricultural activities including crops, land processing facilities, and orchards. We need water, so Equilibrium is deploying capital into a wastewater treatment strategy that has both a renewable energy component and a water component. And obviously renewable energy — we all need energy for the lives that we lead. So we’re investing in operating energy generation assets, primarily wind energy and solar energy.
Nicole: Thanks for unpacking that for us. So, renewables; what was it about the renewable industry that spoke to you?
Jeff: I remember seeing a wind farm for the first time here in the Bay Area in 1988 and being completely captivated by it. It struck me, “This makes perfect sense.” There’s no need to use fossil fuels when we have this incredible resource right here, plus it was just beautiful — it seemed like this ballet across the hills, and ever since then I’ve been in love with the idea of renewable energy.
Nicole: Awesome. So you’ve been working with Equilibrium for about a year and a half now; what got you into renewable investing in particular?
Jeff: During the course of my career, I have been involved in just about every stage of renewable energy projects and most renewable energy technologies, including wind and solar, biomass, hydro-electric, even some geothermal, and I’ve been involved with everything from the very beginning, with an idea of where to build and develop a project, to actually doing the development, to financing the projects, to buying and selling them. When I got the opportunity to work in the financial investment side of it, it was a logical step forward — I’m using all of the experience and expertise I’ve developed doing everything up till that point, and now I’m using it in the investment realm.
Nicole: You mentioned before that you guys at Equilibrium are focused primarily on assets relating to energy, shelter, food, water, etc. What would you say are the criteria you use to determine the assets for your portfolios?
Jeff: In renewable energy, for example, we focus on operating assets, i.e., not assets that are under development but ones that are already in operation. We are looking at North America, primarily the U.S. and Canada. We look at projects that have contracted sales agreements, so the energy that’s being generated by these facilities is being sold to a reliable buyer — what the capital markets call an “investment-grade counterparty.” And finally, we look at top tier well-proven technology. We do these things to address the risks associated with the overall investment. Once the assets are in our portfolios, they are also held to Equilibrium’s environmental, social, and governance (ESG) standards — something we believe is very important in maintaining the value of the assets.
Nicole: Gotcha. So you have been in the renewable industry for almost 30 years; are there any things in the industry that you would say have changed over time?
Jeff: Well, one of the changes that’s been interesting to observe in the time I’ve been in the industry is the public perception of it.
When I was starting, back in the 80’s, and I would describe what I was doing, I would mostly get a blank stare in response — people had no idea, for the most part, what renewable energy was, what wind energy or solar energy was.
And now, of course, it’s very well known. Not only that, but people recognize that it’s the preferred alternative to using fossil fuels and other finite resources that we have.
So I think that’s been the biggest change…and I think also a general awareness of sustainability, and the need to live our lives in a way that can be sustained, where we’re not at risk of consuming all of our finite resources.
Nicole: Are there any common misconceptions about renewable investing that you would like to debunk for us, on the record?
Jeff: (laughs) Well, yeah — despite the broad acknowledgement of the value of renewable energy, a lot of people still look at it as a risky investment. The fact is, the types of projects that I described earlier are now being done as standard energy infrastructure at large scale. In the nearly 30 years since I first witnessed that hilltop ballet, the technology has improved, the cost has come way down, and the output has become far more predictable. Renewable technology is now providing more than 13% of the energy supply nation-wide. Here in California it’s producing more than 20% of the energy supply, and we have a mandate to reach 50% by the year 2030. Current generations of wind and solar technology that are deployed at scale have fairly well-known characteristics, meaning that these once “alternative” assets are understood now by institutional investors as “core” infrastructure. That doesn’t mean every company or technology involved in renewable energy is safe or a good investment — you still need to do your homework — but it does mean the industry itself is pretty mainstream.
Nicole: Good to know. So to tie things up here, is there any advice you want to give the younger generations, either in terms of investing, sustainability, or both?
Jeff: Yeah — well, the first and most important advice is to start now. Even if it’s just a little bit.
And I know it’s hard to imagine that it’s going to make a difference, but starting that habit of taking part of your income and putting it away, investing it in a solid long term vehicle, is one of the best things you can do.
And I’m fortunate that I had someone in my career who pointed that out to me and really encouraged me to start doing that early on. So that’s the most important thing — I also love the fact that, for the Millennials, sustainability, renewable energy, being good stewards of the resources that we have — it’s second nature. Through several generations now, there’s been a growing awareness, a critical, essential awareness, that we don’t have unlimited resources.
So my advice for the Millennials is to pair that sustainable understanding with proactive, disciplined investing.
Nicole: Well I invested like $5 on the Grow app, are you proud of me?
Jeff: (laughs) It’s a good start, Nic. Keep it up.
Nicole: Thanks again for chatting with me, Dad — we all appreciate your advice and your experience. Stay awesome.
Jeff: (laughs) I’ll do my best, thank you.
Big Thanks!
To Jeff Schlichting and to Equilibrium Capital for their great work in the renewable investment industry. You inspire us!
Interested in Learning More?
If you’d like to learn about sustainable investing or how you can get involved, check out Grow’s website or download the Grow Invest app for more info!
