Experts Only Podcast #101:

With Sustainable Capital Expert Trenton Allen

[ Managing Director and CEO of Sustainable Capital Advisors ]

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Transcript

Jon Powers:

Welcome back to Experts Only. I’m your host, Jon Powers. I’m the co-founder of Clean Capital and served as President Obama’s Chief Sustainability Officer. On this podcast, we explore solutions to climate change by talking to industry leaders about the intersection of energy, innovation, and finance. You can get more episodes at cleancapital.com.

Jon Powers:

I’m your host, Jon Powers. Thanks so much for joining us. Today, we’re joined by Trenton Allen. He’s managing director and CEO of Sustainable Capital Advisors. He has a plethora of things that hang under his title, including board members of PACENation and Clean Energy Works, served in executive council for Clean Energy Biden. Trenton has done is built an amazing career in addressing some of the most interesting issues around climate finance, project finance, and finding ways to address the intersection of project finance and policy to help build a more equitable clean-energy future for all of us.

Jon Powers:

Sustainable Capital Advisors is based in DC and they’re doing really interesting consulting and advisory work across a variety of services, and you’ll hear more about that, but Trenton was also just recently named as, by secretary of energy Jennifer Granholm to her new energy advisory board, bringing a really important voice into the dialogue about the future of the industry. I’m going to enjoy this conversation and you can get more episodes at cleancapital.com. Trenton thanks so much for joining me here at Experts Only. First of all, I want to say congratulations, there’s a recent announcement that you were appointed by Secretary Granholm to join this secretary’s energy advisory board. That is a really amazing accomplishment just to get us started, but what excites you about getting involved with an organization like that?

Trenton Allen:

First, Jon, thank you for having me on. And secondly, it really is an honor and a privilege. I’m excited to be selected and appointed to this particular role. I’m excited really just to roll up my sleeves and just bring the years of experience that I have in finance and energy finance space, and really just be a sounding board to the secretary on many of the key initiatives that the department is considering at this point in time, as we think about where we are on climate, as we think about the overall energy system that we have in the United States, and just be able to blend my experience and my voice to really help us think through what are some of the critical issues in times of the day. So I’m really excited to join with an amazing group of people as well, some that I know and others I’m looking forward to meet, and really just do our very best to provide some insights towards the initiatives of the current administration.

Jon Powers:

That’s fantastic. Thanks for your public service on that, it’s going to be so important in this next phase of the industry. So let me step back for a second out of current day events, and you grew up in Cincinnati, Ohio, you went to school for chemistry, right?

Trenton Allen:

Yes, I did.

Jon Powers:

How did you get interested in climate first? And then I want to get into finance.

Trenton Allen:

Climate found me, I did not find climate. So when we recruit, particularly either for our fellowship program or our positions, particularly this generation of people who know exactly what they want to do with the climate environment. I didn’t have a clue. I mean when I was coming out of school, I was looking for a job. I was a chemistry major who didn’t want to go to Cincinnati to go work in a lab at Procter & Gamble. So I was looking for any job that wasn’t that. Nothing wrong with Procter & Gamble, nothing wrong with Cincinnati, but I was just ready to do something different.

Jon Powers:

Got great chili. You got great chili in Cincinnati.

Trenton Allen:

Great chili, a football team that’s winning these days, so, but it was really looking for a change. And I found this company, public financial management, who was recruiting on school, on campus, and what they said to me is, “We don’t care what you majored in. Come here and learn finance.”

Jon Powers:

Oh, that’s interesting.

Trenton Allen:

And I looked at it and they had a three month training program, which I said okay, if you give me three months to learn something, and you really don’t care whether I have a financial background, because you’re having students who have finance or econ backgrounds, you have people who’ve done policy, you have folks who graduated with degrees in philosophy, and we’re all learning municipal finance for the very first time, I was like this is great. This is something that I needed to go learn. And so my first experience there was they were talking about municipal bonds. And to me, as a chemistry major, the only thing I was thinking about was the bonds that we had in chemistry, single bonds, double bonds, covalent bonds. What is this municipal bond thing? And so I just.

Jon Powers:

Where is this in a periodic table?

Trenton Allen:

Yeah, I’m like I’m in the group here with everyone in finance, but I just focused in and said all right, you sent us some books and material, let’s just go learn it, let’s go figure this thing out, and really committed myself to learning this world of finance. And once I got in, I realized that the skills from chemistry could translate curiosity about data and information, understanding relationships between numbers, and then you start to understand financial models and things. So I started really in financial modeling space, so just really a techy, and I built financial models. That’s what I did my first few years, and just happened that one of the projects I worked on was with utilities, and that’s how I started. So it was not because I had some grand design, like some of your listeners may, I just stumbled into it and then found it interesting. And so for the first, I would say, eight years of my career, I was in energy because I was selected to be in energy.

Trenton Allen:

And then I would probably say the middle part of the 2000s, I decided that you know what? I see a future here, and not just because I’ve been in it for so long, the future I saw was really this clean energy. I was looking around how we were thinking about our clients at the time, utility clients, rural electric co-ops with utilities, how they were financing projects, no longer financing large scale coal projects, natural gas projects, a little bit more difficult to refinance. How were we going to finance and how were we going fund our new needs for generation? And started looking at energy efficiency and renewables, and really caught the bug around how that is transformative and how that is the future, let alone being an answer to this existential crisis around climate change.

Trenton Allen:

And so I found it as my career, carried on, not as something that I found it, but once we did, I threw myself in it headlong into the topics of the day. And I was a Citigroup at the time, really worked with a tremendous group of people who we were all figuring out. So Bruce [Schlein 00:07:38], Alfred Griffin, Marshall [Swant 00:07:40], Pam Flaherty, who was at the foundation at the time, Val Smith, who’s now the Chief Sustainability Officer. So we were all figuring out this particular space at this point in time, and so it was really exciting. And I think that foundational years when I was at Citi really set the stage for what I’m doing now.

Jon Powers:

So flash forward a decade, looking back here, did you ever imagine we would be a place where ESG capital’s at a all time high, that boardrooms, you get the Larry Fink letter. So much has happened the end of this last decade that’s just continued to trigger things forward.

Trenton Allen:

So yes and no. Yes, because there was no other choice. So yes because you could see the trajectory. So if you looked out, looking at innovations related to energy efficiency finance, the beginnings of ESG, concerns around the environment, not just in the US but you look globally, you can start to see the trends and you can see things moving. And then you started to think about the investments that were made over a decade ago through the Recovery Act and you start to see some of those fingerprint.

Jon Powers:

The steroid injection we needed.

Trenton Allen:

Exactly, foundational in such a powerful way. So you can start to see that, it’s not a surprise that we got here, but I am still surprised because I do remember a bunch of times when people looked at you and say ESG, or climate, or energy finance is like all right, this is a niche of a niche you’re thinking about. And to see it now being mainstreamed is good to see, but now it is how do we convert all of this attention in words into action that we need to to deal with what really, at the end of the day, is an issue around climate change but there’s also this transition of how we think about our overall energy infrastructure system in doing it in a much more sustainable way.

Jon Powers:

Yeah, I want to come back to that because we talk a lot in this show about the tipping point that we’re in right now and how exciting the next 10 years look like, but in that gap, so looking back, you founded Sustainable Capital Advisors. First of all, what need did you see when you decided to launch the firm? And talk a little bit about what you do.

Trenton Allen:

Sure. So in 2011, 2012, I was at Citigroup prior to that, and one of the things that I enjoyed doing was really helping our clients develop new solutions. And it was off the heels of execution of basically one of the first green bonds, not labeled green bonds but the Delaware Sustainable Energy Utility had issued Energy Efficiency Revenue Bonds basically the year before. And recognizing that part of what I enjoyed most was helping get that organization to a point where we actually were able to access the marketplace. And then thinking through where other newer developers and newer projects, newer technologies need to be, I recognize that organizations like Citi, having long lead times and product development cycles, are difficult. So the capital markets really want to deploy as quickly as you possibly can, but there’s such a need to really get these projects prepped such that capital providers like yourselves and others can be able to evaluate underwriting.

Trenton Allen:

So the gap that we saw at the time was these projects needed to get prepped. You needed people who understood the finance markets who could package these projects together, who can identify who were the right investors for the right projects, and really shorten the time that it took for getting projects executed. And so that’s what we spent time working on and started to really work with wholesale developers who had amazing ideas, who had really good projects and ideas, and really needed some help on how did they get them? How could they get it packaged together such that capital providers could deploy capital to those projects. And that’s really the niche that we saw. So if we wanted massive deployment, then what do we need to do? We need to step in the gap to basically help what we saw as free development work. And I found it particularly interesting because we were able to do it in projects that were not necessarily siloed, so we were able to do energy efficiency, and waste energy, and biomass, and community solar when it was just first starting. PACE, back in the day.

Jon Powers:

PACE, yeah. You’re on the board of PACE, right? You’re the board of PACE.

Trenton Allen:

Yes, I am. And so able to look at all these different types of technologies, and one of the things that, when you look for a through line, is how we think about the underpinnings of finance and think about these underlying structures, there’s so much that’s in common with how they’re financed, there are some different things on technology that we need to be considerate of, but there is so much commonality that if we could bring some of these cross-learnings outside of these silos, what we found is that we were able to bring better structures to our clients.

Trenton Allen:

We were able to help, at the end of the day, solve the problem, how do we create a structure that capital providers would find acceptable and how can we then have the developers rate projects and structures that they could effectively sell to their customers? And so that’s the space that we found ourselves and really, really enjoy because it allows us to be creative, look around the world for what are some of the innovative structures and approach, and really not only be limited by our imaginations, but looking really to think through how do we create? Once we created a structure, then how can we utilize that to scale? Because at the end of the day, being able to scale is incredibly important.

Jon Powers:

I want to ask you to give me a case study of one of your favorite projects you’ve worked on, but before doing that, with starting in 2011, here we are really a decade later, the markets have matured on the technologies we talk about, developers still struggle sometimes to understand how to put together projects that are really financeable. What has changed in the work that you’re doing over the last 10 years? And with that, then what do you think will change 10 years forward?

Trenton Allen:

That’s a great question. I was saying when we first started, we were all project finance advisor, so we were working with developers, helping them to create financial models. Press test them, vet them, make changes, then help them then basically work through identifying capital providers, then documentation, and then rinse and repeat. That’s what we did.

Jon Powers:

Like an outsourced capital market shop, basically?

Trenton Allen:

Exactly. So all the stuff we did when I was investment banking. imagine that. So that’s what we did and had a great amount of success to it. And so we still do that work, and so we still do that work of being project finance advisory to develop.

Jon Powers:

Yeah, still need it.

Trenton Allen:

Still need it. But what we found is where we work at now, some of our developers that we worked with have graduated beyond us, which I think is a great thing. They’ve brought people in house, they’ve done a couple deals, they now can perform both functions themselves. And so we see our role, in some respects, like if we are collectively good at what we do, we’ll put ourself out of business with regards to the project finance piece, because the market’s mature, they’ve identified capital providers, they understand this particular space, and that’s a really good thing. So we go look for others. So what we find ourselves doing is then what we call our sustainable finance practice is really, really work with a lot of new developers who are getting into the space where effectively it’s a one or two person organization. They have identified good projects, they’ve identified the counterparties, but at the end of the day, they don’t necessarily have the bandwidth to do some of the financing pieces.

Trenton Allen:

And so basically we are working with them to develop those capabilities in house and, as I said, they’ll continue to grow, they’ll do more projects, they’ll hire somebody on their team who will do this critical function. So that’s the role that we play and we do from concept to closing on the finance side. The second piece that we do is what we call our sustainable communities group practice, and that is really thinking about instead of looking at projects at the project level, think about it in the context of a service territory or a utility system. And so in that space, we’re a financial advisor to the US Virgin Islands Water and Electric Authority, we’re a whole financial advisor to DC Water, and that just gives us a view of how you think about sustainable infrastructure and technologies being implemented throughout the entire system. It just gives us a different view and that is a change from where we were. So we were always just focused squarely on projects, but now thinking about it a little bit broader.

Trenton Allen:

And then the last thing that spurs evolution for us has been thinking about policy and research side, which is how does finance impact the ability to deploy capital for the benefit of civil infrastructure projects? So at policy level. So in that space, we worked with one of the largest foundations for climate finance and helped them develop a five year climate finance strategy. We’ve worked with both solar in 2017 on an inclusive solar finance framework. So looking at how do you expand opportunities for low income and low credit score customers to really access and what are the barriers? And then we’ve also done a lot of work with green banks and nonprofit finance institutions across the country, and really helping them understand what’s their underlying deployment strategy, what are the products that they’re offering? What does their overall business strategy look like? How can they take public capital and private capital, blend it together to fill these particular gaps in their particular areas?

Trenton Allen:

So whether that was work that we’ve done with the Maryland Clean Energy Center, or work that we’re doing now with the Community Investment Guarantee Pool, or for a few others, it’s really looking at this intersection of blended capital between public and private sources and how do we use that to expand opportunities? And so our work has really gone from just being in project finance, which we still do, into thinking about things in a broader sense. And so I would say that we’re able to both have an ear to the ground, which is really good, hands in the dirt, understanding the project level, but also being able to think about what are the tools and levers that exist for being able to accelerate capital at a much, much different level when it comes to thinking about the combination of, whether it be asset owners, policy. So where does that intersection exist so that we can really meet the goals that we need to have to really deploy to meet the challenges of climate change.

Jon Powers:

Well, that work sounds so critical, Trenton, because I feel like you’re living in a intersection where we could finance vanilla projects all day long, but if we want to grow into actually engaging the LMI community, for instance, we’ve struggled on community solar to get tax equity providers and debt providers to want to play in that space, and so how do we put together the right mechanisms at a public level, whether it be at a jigger shop, a long guarantee office, or the green banks, to the equity providers who are willing to take that risk can get the rest of the capital stack in that right now will talk the right game, but isn’t actually putting their money where their mouth is in that space?

Jon Powers:

So that intersection is just so critical to solve some of the problems. So now, you’re sitting in DC, we’re in the middle of probably one of the most critical conversations we’ve ever had on climate, and finance, and policy with some of the legislation moving today. If things go forward like we hope they do with things like direct pay and some of the administration’s new goals, how do you see that acting as a second catalyst here for the industry over the next 10 years? And then with that said, how does the role that you guys play change as we’re moving ahead?

Trenton Allen:

It’s a transformational moment that we’re in. We have, over the last 20 years, been able to build a foundation of projects, participants, this ecosystem that exist. And the reason I say this is transformational is because I think we now are at the space where we can accelerate, at a really, really rapid pace, what we all can do. So the ability to deploy known technologies to deal with not only potentially energy savings but also think about CO2 reduction is incredibly important in that hand. And I think that from what we see in the impending legislation is really the fuel and attention to that deployment that we see, and providing some of the additional supports, particularly as it relates to pre-development or some of the gap funding that exists there, that creates the conditions that more projects can be structured and put together that yourself and others can finance in.

Trenton Allen:

So we think that this really becomes transformational in that sense. And I also would say the other piece to that is I think there’s this blending of not only just thinking about the pure reduction in addressing things about discussions around energy use, our overall energy system and grid when it comes to carbon reduction, but also I think there’s this other piece around economics and job creation, and not only just those pieces separately, but also thinking about how can we use this particular transformation to be intentional around making sure that opportunities are flowing in a much more inclusive and equitable way.

Trenton Allen:

And so as we see through the announcements from the administration related to their Justice40 Initiative, I think there’s this moment here where we can think about the wheels of not just government but philanthropy, as well as corporations, as well as just the industry generally, and ensuring basically that whether there is additional capital that’s available at the federal level or even just as projects, that we are looking to expand the opportunities because not only is that the right thing to do from a moral societal standpoint, but it’s also the right thing to do from a business standpoint. There is the ability to deploy these technologies and communities all across this country, and so one of the things that we can do is make sure that we are inclusive when we are thinking about who’s not only performing the work, the companies that are doing the work, but also who gets to participate as investors. I think that’s incredibly important, and I think it’s the final stage when we think about this attention to equity and inclusion.

Jon Powers:

I love it. So let this be the first of a series of conversations, because I really love the way you’re thinking about this and approaching the market, and I could talk to you all day because the area you’re focused on is at the heart of what I’ve built my career on, but I do want to go back to Cincinnati. You’re coming out of high school. You can sit down at Skyline Chili and have a conversation with yourself, or coming out of college, you can sit down and have a beer. What piece of advice would you give yourself?

Trenton Allen:

The piece of advice that I would give myself is know what you’re doing and why you’re doing it. When you’re starting a career, you’re starting, sometimes you’re just there. You’re in a job for a period of time because you’re in the job.

Jon Powers:

Trenton, I was in the army, so I was told to be there.

Trenton Allen:

You may not have this plan. So one of the things that I would tell myself the same thing I tell particularly young analysts and associates I work with in investment banking and people on our team now is every six months, just decide why you’re staying, why you’re here. And it could be for any number of reasons. It could be I’m staying here because I want the paycheck, staying here because I don’t have a clue what I want to do next, and so this is the space, but if you can actively decide why you’re staying, then you are an active participant in your career, in your journey, as opposed to a passive participant.

Jon Powers:

Oh, interesting. Yeah.

Trenton Allen:

And one of the things I stayed where I stayed because I needed to pay my student loans off. So I was working to pay my student loans off. Then I can do that, after a long time, then you start to stay for other reasons. You may stay because this is a job that’s in the right location for you, you may just be staying because you see a career there or it allows you to do other things in your life, have a work/life balance. There’s no judgment about why people stay, but just to know that you’re staying, you’re actively deciding every single year that you’re staying, that there’s an eye on a prize as opposed to too many people I found when I was in investment banking, or in advisory, or wherever else is that you look up and it’s been a decade, and I wish I would’ve done something else.

Trenton Allen:

And so this is all about basically if you know why you’re staying, then you’re an active participant. And that’s what we really want to be. You’re better at your job when you’re actively engaged in it, you’re better in your life when you know what you’re doing. And it doesn’t mean that you figured it all out, but at least you’re making these decisions on a continuous basis. I found that for me and for the folks that I’ve had the pleasure working with, you really get the best out of yourself.

Jon Powers:

I love it. Well, thank you for sticking in the roles that you stuck in to make the work you’re doing. It’s incredible. You can always learn more about Sustainable Capital Providers, it’s a sustainablecap.com. It’s a great website, by the way. Want to thank Bill [McCue 00:26:53] and your team for helping to put this together, and really enjoyed the conversation. And good luck with the important work you’re going to be doing with Secretary Granholm.

Trenton Allen:

Thank you so much, Jon, for your time, and really was a pleasure, and of course conversation. Thank you.

Jon Powers:

You’re welcome. And thanks to our producers, Colleen Young and Carly Battin. As always, get more episodes at cleancapital.com. I look forward to continuing the conversation.