There is a trend towards sus­tain­abil­i­ty among con­sumers. Does that also apply to invest­ing?

Har­ald Zenke: Very much so, because there is also pres­sure from what are referred to as “pro­sumers” – a nice buzz­word for “pro­fes­sion­al con­sumers”. Germany’s Fed­er­al Grids & Net­works Agency uses this term to refer to a group that both pro­duces and con­sumes, espe­cial­ly in the field of renew­able ener­gies. And this group attach­es more impor­tance to its own pro­duc­tion chains than pro­duc­ers and investors do.

At the end of the day, there are many rat­ings that deal with sus­tain­abil­i­ty and the envi­ron­ment. For exam­ple, char­i­ta­ble foun­da­tions and church­es have adopt­ed the Oecom seal of approval as an invest­ment cri­te­ri­on. With­out this seal, no funds will be forth­com­ing from these investors.

Years ago, the Ber­tels­mann Foun­da­tion pro­duced a sur­vey under­tak­en by the Uni­ver­si­ty of Stuttgart, look­ing into whether sus­tain­able invest­ments are more suc­cess­ful – and, if so, why? Sta­tis­ti­cal­ly, they found that, yes, they are more suc­cess­ful, pro­duc­ing high­er returns – not because they are eco­log­i­cal, but because investors and entre­pre­neurs tend to look longer and hard­er at the process­es involved, con­sid­er­ing the impact on the envi­ron­ment, on them­selves and on future gen­er­a­tions. That’s why more and more investors are turn­ing their backs on oil.

In oth­er words, if you were to shoot a tele­vi­sion series like Dal­las today, it would­n’t be set in the oil busi­ness, but would fea­ture the world of wind tur­bines and hydro­elec­tric pow­er plants?

It would be “renew­able ener­gy meets dig­i­tal­i­sa­tion”. Infor­ma­tion and net­works are the oil of tomor­row. Soci­ety is chang­ing as we speak. There is this con­cept of the “shared econ­o­my” where we’re start­ing to share much more, and by so doing we’re turn­ing into a soci­ety with a more seg­ment­ed, more region­alised way of think­ing.

But there are also peo­ple who reject the shared econ­o­my because they feel it is tak­ing some­thing away from them.

What’s on these people’s minds is the issue of self-deter­mi­na­tion that springs from hav­ing one’s own pro­duc­tion capac­i­ty. Pro­sumers want to become self-suf­fi­cient, plant their own veg­eta­bles again and put solar pan­els on the roof. This is not a trend that runs counter to the shared econ­o­my, but rather a trend towards form­ing region­al net­works. As a result, there’s a very strong inter­play between pro­duc­tion and invest­ment.

Because of dig­i­tal­i­sa­tion, our ener­gy con­sump­tion is not falling. Quite the oppo­site, in fact: e‑mobility, for exam­ple, is cur­rent­ly what everyone’s talk­ing about. In the pri­vate sec­tor, this is set to increase very strong­ly over the next few years. For an aver­age employ­ee com­mut­ing 30 kilo­me­tres, the num­bers add up.

But for the logis­tics indus­try and oth­er com­mer­cial enter­pris­es, it can become a real prob­lem when Frank­furt, Munich and oth­er cities announce inner city diesel bans: how do you get into the city in such a sce­nario? Elec­tric vehi­cles are not the answer here, because they don’t offer the required range. Actu­al­ly, in such sit­u­a­tions, the obvi­ous answer is to switch to hydro­gen.

The pro­duc­tion of hydro­gen requires elec­trol­y­sis. And so we come, once again, to the excess ener­gy pro­duced by wind, solar and hydropow­er which can be used to elec­trol­yse hydro­gen and pro­duce a replace­ment for diesel – while offer­ing a stor­age medi­um into the bar­gain. So it’s excit­ing times once more for investors with an inter­est in ener­gy-effi­cient ini­tia­tives which are set to make last­ing changes to the econ­o­my.

For many peo­ple, invest­ing in sus­tain­able ener­gy con­cepts is most­ly about solar ener­gy and wind pow­er. Hydropow­er still seems to be a niche thing.

That’s a fair com­ment. But let me say this: hydropow­er is one of the old­est ener­gy sources known to man. If you think of water pow­er, you think of an idyl­lic water wheel turn­ing, fed by a stream some­where up in the Black For­est. The first clas­sic instance of pow­er con­ver­sion was water pour­ing onto a water wheel. For cen­turies, hydropow­er has been used in a vari­ety of forms. Pre­cise­ly because it is so tak­en for grant­ed, it is not being hyped the same way as solar ener­gy or wind pow­er.

The tech­nol­o­gy has been proven over cen­turies and has been opti­mised con­stant­ly through­out. Any­one pur­chas­ing this kind of tech­nol­o­gy can assume it will run for at least 50 years. Wind pow­er, for exam­ple, has very dif­fer­ent main­te­nance inter­vals. Hydropow­er offers the high­est rate of effi­cien­cy.

Added to this is the fact that, when talk­ing to investors, you see the emo­tion­al con­nec­tion hydropow­er has when you bring it into the con­ver­sa­tion. Any­one who invests in a wind farm wants a return, but not a wind farm next to his house. Any­one who invests in a large solar park can already hear the loud hum­ming of the trans­form­ers. In such cas­es, investors only want to sign a piece of paper and for­get it. A run-of-riv­er pow­er plant, how­ev­er, is asso­ci­at­ed with streams and nat­ur­al sur­round­ings: it’s some­thing peo­ple would like to go and see for them­selves.

How do you rec­og­nize a good invest­ment in hydropow­er when you see it?

Of course, you always have to look at who’s involved in the project. In addi­tion, I would always advise any first-time investor to go for a so-called brown­field pow­er plant – one that is already con­nect­ed to the grid – because there’s no con­struc­tion risk. Once some­one has become a bit more famil­iar with the issues, they could invest dur­ing the con­struc­tion stage to enhance their return even more. The rea­son is that an exist­ing hydro­elec­tric pow­er plant has already had pre­vi­ous own­ers, while a green­field plant offers the oppor­tu­ni­ty to get the ben­e­fit of the ini­tial return.

You are now on the advi­so­ry board of Ali­quan­tum. What moti­vat­ed you to do that?

I have been work­ing in renew­able ener­gies for 30 years now. Ali­quan­tum has brought me back to the clas­sic pow­er source: water.

But I also find the geog­ra­phy excit­ing: as far as risk pro­file is con­cerned, Ser­bia and Bosnia have cer­tain advan­tages. For exam­ple, any­one run­ning a hydropow­er plant in Switzer­land, with a large influx of glac­i­er water, will even­tu­al­ly encounter a prob­lem when the glac­i­er has melt­ed. In Ser­bia and Bosnia, on the oth­er hand, you do not need glac­i­er water or deplet­ing reser­voirs. Unlike oth­er coun­tries, they have suf­fi­cient rain­fall. It is also an inter­est­ing part of the world from a geo­des­ic point of view, in oth­er words as far as the char­ac­ter­is­tics of the earth’s sur­face, the degree of steep­ness and so on are con­cerned.

And not least, of course, this region is going to whet investors’ appetites big time because it’s a can­di­date for acces­sion to the EU. Nowa­days, coun­tries look­ing to join the EU will do what­ev­er is need­ed to meet the reg­u­la­tions involved. This means that invest­ing in such coun­tries is much safer than some peo­ple assume. It makes the region some­thing of an insid­er tip for investors and still pro­vides a very good oppor­tu­ni­ty for returns. How­ev­er, this will van­ish as soon as Ser­bia and Bosnia are acces­sion coun­tries.

Harald Zenke

Har­ald Zenke


Cur­rent­ly a Man­ag­ing Direc­tor at North Chan­nel Bank, Har­ald is the for­mer Speak­er of the Man­age­ment Board at KFW IPEX-Bank, the export and project finance arm of KFW. Pri­or to that, he was respon­si­ble for the Euro­pean cor­po­rate bank­ing and Cor­po­rate Finance divi­sion as Exec­u­tive VP Europe at Lan­des­bank Baden-Würt­tem­berg.