Q&A with Tomas Hvamb, EV Private Equity
Published 6th July 2021
By Sarah Casey, Portfolio Director, Climate Council
EV Private Equity Partner, Tomas Hvamb, leverages over a decade of energy industry knowledge to add value to EV’s portfolio of sustainable energy technology companies. Aside from sitting on the board of five of these companies, leading internal digitisation strategies and his day-to-day duties as a partner, Tomas pursues relevant investment opportunities across new markets that will accelerate the energy transition. From the development, construction and asset management of wind and solar projects and offshore floating wind technology to grid optimisation and waste to energy technologies, Tomas has a passion for making a real impact on the environment.
Q. EV Private Equity (EV) have recently changed your investment mandate to focus more on clean energy. Can you give some more details on the types of companies you’ll be investing in going forwards?
As a technology focused impact investor, we are committed to achieving greenhouse gas emissions reduction through differentiated technology investments.
Our investments fit a very precise profile. They are all in the growth stage of development with experienced management teams; have a differentiated offering in terms of technology; and possess a scalable business model.
Specifically, they must have the potential to contribute significantly to a reduction in carbon emissions. EV invests only the technologies that will be critical to the world’s energy transition and offer a significant contribution towards first reducing, then ultimately avoiding Green House Gas (GHG) emissions.
We target investments in companies that provide innovative solutions, and/or services, to the renewable industry and decarbonisation of industrial value chains, including electrification and energy efficiency solutions.
Q. What will potential portfolio companies need to show in terms of ESG/sustainability commitments in order to get investment?
Responsible investment and creating sustainable shareholder value are at the heart of EV Private Equity, and we’re committed to playing our role as we transition to a low carbon future.
We monitor the impact of our investments on the environment, the economy, and society, as well as the company’s impact on its customers’ emissions. We perform this measurement using our very own proprietary impact and sustainability measurement framework, EV IQ™
This tool has been designed to be aligned with the best industry practices as set out by the Green House Gas protocol, the United Nations Principles for Responsible Investments (UN PRI), the Task Force on Climate-Related Financial Disclosures (TCFD) and the EU Sustainable Finance Disclosure Regulation (SFDR).
Potential portfolio companies need to illustrate a powerful commitment to ESG to become integrated in our portfolio. Within the ‘Environmental’ factor, we are looking specifically at companies which, by design will reduce either Scope 1, 2 or 3 carbon emissions.
We will not invest in management teams that are not fully aligned with us on ESG and share our vision to make a broader positive impact beyond climate change. Once sustainable impact has been defined, full third party ESG due diligence is undertaken for all new investments.
Our ESG program for portfolio companies comprises a comprehensive monitoring framework to proactively manage and improve ESG performance. Implemented in 2019, the program includes the systematic collection of key policies and reporting of critical ESG KPIs on a quarterly basis.
Q. What do you see as the role of investors in helping portfolio companies transition/meet ESG standards/become more sustainable? How are EV PE doing this?
Investors, including EV, have a duty to set the agenda at board level and make ESG a priority to ensure companies implement practices accordingly – referred to as a ‘top down approach’.
Furthermore, we also have the responsibility to educate company ESG officers by providing them with information and tools to operationalise their plan – referred to as a ‘bottom up approach’.
We have our own internal Director of ESG, which enables us to actively track the development of new practices and standards, continually enhancing our ESG programme to improve our role as a responsible investor and ability to deliver a sustainability focused investment strategy.
When portfolio companies report back on ESG, we make sure they are setting ambitious targets for improvement throughout all three areas. We aim to set the standard amongst our peers to encourage and disseminate best practices for our portfolio companies.
Q. The ‘Hydrogen Hype’ is well and truly underway, with many hailing hydrogen as the silver bullet of the energy transition. Do EV consider hydrogen as a key theme? How are EV approaching hydrogen and CCUS technologies?
We see both hydrogen and Carbon Capture Utilisation and Storage (CCUS) as key emerging trends which we will follow closely as we accelerate to a low carbon economy.
The deal flow behind both themes is strong but pricing, as you mention, is aggressive. However, it is highly likely that you will see EV and its portfolio companies make investment in both these areas in the future.
Both hydrogen and CCUS will play an integral role in the future energy mix alongside oil and gas, offshore wind and solar. Currently, green hydrogen is far too expensive to produce with today’s technologies and hence, significant government subsidies, or “real” carbon tax, is needed for this be scaled up.
As such, it will take some time before significant traction can be realised for hydrogen. On the other hand, CCUS technology is here and in practice, but projects are very CAPEX heavy and therefore may not fit well with our investment criteria.
Q. What role will digitalization play in the energy transition? Is this something EV will be focusing on going forwards?
Since our inception in 2002, digitalisation has always been a core thread in our investment portfolio. Digital technologies are essential for us to improve the safety, productivity, accessibility, and sustainability of our energy systems.
From allowing the integration of renewables into power grids, to extending the lifetime of assets and decreasing manpower, digitalisation is key to enabling smarter operations in the energy industry as we transition to a low carbon economy.
The world we live in revolves around digital technology, which is advancing at a very rapid pace. Those who cannot adapt to the increased pace of technological disruption will be left behind. Our mission is to ensure that both our portfolio companies and EV itself become leaders and not followers in digital within their respective industries, now and in the future.
Signalling our commitment to this, is the recent development of our very own digital maturity tool. This methodology is used in our portfolio and for any new investments to understand status, risk, and opportunities within digital.
The tool explores and investigates digital strategy, culture, capability, and client experience, and provides a ranking in these key areas of digitalisation. The development of this tool is weaved into my role at EV, which I’m very passionate about. I see it as a way of future proofing our own and portfolio businesses.
Technology and digital innovation have and always will be in our DNA, and we want to be able to support our portfolio businesses on the digital journey of the future.
Q. EV has recently teamed up with ClimatePartner to offset the organisations own annual greenhouse gas emissions. Can you tell us what types of emissions this will cover and how? OR This is really exciting. Can you tell us some more about it?
This offset will cover Scope 1, 2 and 3 emissions (purchased goods and services, capital goods, business travel and employee commuting).
We also supporting the Ecomapuá forest protection project in Pará, Brazil, to ensure the area has long-term preservation, and the protection of forests is given a higher value than deforestation.
However, we acknowledge offsetting is not the only answer. In line with the targets set out to our portfolio companies to reduce the amount of Scope 1 and 2 carbon intensity generated from products or services by 7%, we’re continuously seeking how we can reduce our own emissions over time.
In addition, we have set out a target for portfolio companies and EV to obtain a full overview of the Scope 3 emissions lifecycle within an 80/20 rule, which is a rough consideration of the top 20 sources of emissions responsible for 80% of a company’s total emissions.
This commitment means we’ll continue investigating and documenting main sources of emissions and offsetting accordingly, which is made possible with our proprietary EV IQ™ tool. The validation process of Scope 1-3 calculations is a stringent one, but leads to carbon neutrality label.