Q&A - Commerz Real: Driving impact investment in renewable energy

At the heart of Commerz Real is our understanding of the interconnectedness in the real asset space.

Commerz Real is a German asset management company and a member of Commerzbank group.

The financial products it offers include hausInvest, an open-ended real estate fund established in 1972, and klimaVest, their inaugural impact fund for private investors.

Its investments have covered solar, offshore wind and onshore wind. In 2020 they launched their flagship renewable energy fund klimaVest, which has raised over €1.2 billion (£1.05bn $1.27bn) to date.

inspiratia speaks to Tobias Huzarski, the head of impact investment at Commerz Real, to discuss its unique role in the renewable energy project finance.

Can you provide an overview of Commerz Real's involvement in renewable energy project finance and its approach to sustainability?

Commerz Real primarily focuses on real assets, and this focus is crucial when considering our approach to sustainability and impact investment as a derivative.

Impact investment in our view, revolves around solving real-world challenges. For example, on the real estate side, the lack of affordable housing necessitates the provision of actual housing. Commerz Real's strength lies in its ability to tackle these challenges head-on, given our track record in real assets.

We have been investing in renewable energy and infrastructure on behalf of clients for over 15 years. Our investments have covered solar, offshore wind and onshore wind. In [2020] we launched our renewable energy fund, klimaVest which is accessible to private investors and semi-professional investors in Germany. It has raised over €1.2 billion to date.

Our approach to impact investment emphasises the importance of bridging capital into renewable energy assets and related green deal infrastructure. Capital can flow either horizontally through secondary markets, e.g. publicly traded securities, or vertically into real-world wind or solar projects. The latter approach is most compatible with impact oriented investments.

Substance is as relevant as transparency. While measuring and disclosing sustainability data is vital for transparency and alignment with Environmental, Social, and Governance (ESG) criteria, it should not overshadow the ultimate goal of allocating capital to advance sustainability and decarbonisation which is a substance point rather than a disclosure point.

What makes a project investable for the fund?

Our approach to investment involves three main criteria: return, sustainability, and formal aspects.

We assess projects based on risk-adjusted returns, taking into account the market's current dynamics.

The sustainability criteria include evaluating the project's impact on green energy production, ensuring it causes no significant harm, and meeting social and governance standards.

Formal aspects involve deal size, jurisdiction preferences, and other considerations.

How does your role differ when working with independent power producers, utility companies, and financial and institutional investors?

We primarily see our investors as our primary clients, regardless of whether they are semi-professional buyers, retail or institutional investors.

While we deal with a variety of stakeholders like power producers and utility companies, the core focus remains on serving our investors and act as responsible stewards of capital.

How does Commerz Real stand out in the market compared to other players or competitors?

At the heart of Commerz Real is our understanding of the interconnectedness in the real asset space.

While many competitors may focus on specific types of real estate or infrastructure, Commerz Real's funds invest across real asset sectors and asset classes in Europe and globally. This gives us a nuanced understanding when it comes to relative risk-adjusted returns across sectors.

What role does innovation play in your approach to financing renewable projects, and are there any specific technologies or trends you're excited about?

Our approach to innovation is focused on solutions that improve or scale existing technologies e.g. wind or solar energy generation. We aim to enhance the performance of our utility-sized energy projects. For example, we have recently invested in a hybridised solar and wind project in Spain. The project uses a common grid connection, and upon completion it will deliver a much more constant energy supply compared to usual standalone wind or solar. We are also currently developing a large scale agri-solar project, which combines energy generation and agriculture.

What are you currently excited about in the renewable energy space?

The energy transition is gaining momentum in terms of depth and speed. Clean tech investments have started to outpace fossil fuel investments.

Having said that, the challenge is still immense when it comes to decarbonising energy use.

One exciting field, for instance, is the decarbonisation of industrial processes when it comes to concrete production.