Crux Connects: Mathew Loving of Schneider Electric on lessons learned as a tax credit buyer

Welcome to Crux Connects, Crux’s interview series with energy finance experts. The market for transferable tax credits has grown more competitive over the last year — 2024 saw seasonal pricing trends emerge, bids concentrate, and demand outstrip supply. Schneider Electric has a unique vantage point on the market, as both an advisor to tax credit buyers and a buyer themselves. 

Dubbed “corporate America’s go-to decarbonization partner,” Schneider’s Sustainability Business enables large companies to achieve their decarbonization goals by leveraging tax savings from buying tax credits to fund their sustainability strategies. Their own parent company is the first successful example of this innovative approach to corporate emissions reduction. 

In this episode, Mathew Loving, associate director with Schneider’s tax credit investment team, joins Crux Partnerships Lead Madisen Obiedo to talk about Schneider’s unique experience as a buyer, how it informs their view on the transferable tax credit market, and the company’s advice to other tax credit buyers in 2025.

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Transcript

Lightly edited for clarity

Madisen Obiedo: Thank you so much for joining us today, Mat. We're really excited — today's discussion, and our topic, is very timely, particularly given the milestone that Schneider and its sustainability business shared recently. 

Today we're going to explore best practices for buyers of transferable tax credits as we approach the second half of 2025. I can't believe we're already there, but here we are! And we're going to learn more about what you're seeing in the market, given both Schneider USA and your work on the sustainability business. That really gives Schneider Electric a unique vantage point on the market. 

So with that, let's go ahead and get started. To kick off, can you just share your impressions of the state of the market today? What has surprised you most about where we are in 2025?

Mathew Loving: Every day is a surprise here in 2025, I think. But in terms of the market itself, we view it as robust and also subdued at the same time — funny to use those words that are seemingly contradictory. But we have many clients that are aggressively driving forward. They're securing their necessary internal approvals, sending out term sheets, finalizing transactions, and that's really exciting. For a market that has only existed for a few years, to have a number of these organizations extremely active is great. 

On the other hand, there are other clients, many of whom have large tax liabilities and/or ambitious sustainability goals, who are taking a more measured and maybe hesitant approach. They could be waiting for firm numbers on their tax appetite, or they could be transacting with a “dipping our toes in the water” type of mentality. Some are pausing their efforts until there's more clarity out of DC. After working with these clients for so long, I probably shouldn't be surprised that there's so much variety in their approaches. So saying this out loud is a good reminder for me and anyone listening of just how different the perspectives of various buyers can be.

MO: That's a great way for us to frame up the discussion. Schneider is really uniquely positioned in the market in that you and your role with the sustainability business advise these corporate taxpayers and get a lot of exposure on what's happening in the market and what's top of mind for buyers. But also, Schneider USA has purchased transferable tax credits, too. 

What lessons have you learned from those purchases, and how do they translate into how you're advising corporates navigating the market in the sustainability business?

ML: We could spend this entire time discussing just this point! Part of the reason we tracked these lessons learned so closely is because we knew they'd be so directly relevant for our third-party clients, as well. We weren't taking the approach of, “Hey, let's do a deal and this will be our one deal. Maybe we do another deal next year.” We were taking the mindset of, “Let's do our deal and then use this intentionally to inform and drive success for our clients.” 

Some things that come to mind immediately are: 

• First and foremost, never underestimate the number of stakeholders and how they may want to be involved. These are transactions that involve functions across the organization, and frequently we are introducing members of the client’s team to other people in the organization who they didn't even know, even functions they didn't know existed at their company. That can be a big lift, but it is so critically important.
• Get internal alignment, not just as early as possible, but also throughout the whole process. Just because you had one meeting where these various stakeholders aligned on something internally, does not mean you're free and clear. There will be — and there should be — consistent checking of, “Hey, are we still aligned?” There will be new topics and things that could create a lack of alignment, so really make sure to stay aligned throughout the process. 
• Consider the nuances of the sustainability story for different internal audiences. If you have a sustainability manager, director, vice president, whatever the case may be, they are oftentimes going to be thinking really specifically. They want to make a claim. If they're making a Scope 2 reduction claim, they want to make sure there are renewable energy credits (RECs) included in a separate transaction and make sure they know what the source of those RECs are, what years, what vintage, what technologies, and all those things. So that story is going to be different for a sustainability leader versus a CFO or others. 
• Perhaps in the organization, there are strategic considerations. For big companies, there may be existing business relationships with some sellers. We did our first flagship deal with ENGIE — that's public — and we've worked with ENGIE in a variety of ways across a variety of parts of our business. So that was certainly a benefit of that initial transaction: working with a company that we knew. 
• The next one is the importance of keeping a formal cadence. We try to really keep weekly, bi-weekly, whatever the case may be, keep that cadence with the deal team and not just say, “Hey, let's set an ad hoc meeting next Tuesday, because we think we have something to talk about.” I think especially now, when there are so many distractions for all of us, having that weekly meeting, it's a tactical thing, but it's so important to just know, “Hey, in two business days, we're going to all reconnect and dive into this again.” 
• Another tactical thing is holidays. We closed some deals both at the very, very end of 2023 for us, and then some client deals at the very end of 2024, and they almost didn't get done because people were going to Cancun for their trip with their families, which, of course, they should do. But it's an important consideration to just be aware of and plan for. Maybe there's someone else you need to delegate signing authority to, or whatever the case may be. 
• Similarly, really understanding that path on final approvals and execution. Again, it sounds like such a simple thing, but who's going to sign this contract? That is something that we really work closely with our clients to understand as early as possible and not just, “Hey, we’re pens down. We have this negotiated, now we’ve got to figure out how to sign it.” That's the situation we want to avoid. Then similarly, who can make that final call on various risks, various legal language, insurance, seller credit. There's the adage of, “There are typically a lot of people who can say ‘no,’ but only one person who can say ‘yes,’” that I think has definitely proven to be true in this space.

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MO: What I'm hearing is that there's a lot of work to be done on getting those internal approvals, getting that buy-in from the right teams, and keeping folks updated. Certainly I'm hearing echoes of what we observe at Crux, too. Let's shift gears into some of the insights that you have based on your work in the sustainability business at Schneider. What are you hearing from tax credit buyers in the market today? What kind of questions are they asking about transactions? 

ML: Obviously it’s a question I and others on the team are getting multiple times a day, and it's somewhat challenging to provide a single, overarching reply. With roughly 50 clients across different industries, different team members, different personalities, different places in their journeys, there's not a single one-size-fits-all answer. But it would be disingenuous not to acknowledge that we're getting tons of questions about what's happening and what may happen in DC, not just with respect to the IRA itself, but broader tax policy. It's not just, “Hey, what's going to happen, what may happen with the IRA?” We have a client who told us just recently that they might have tens of millions in tax appetite in 2026 or two million, based on how tax policy unfolds. 

Our overall response to these questions is A), we think it's a great time to transact. We are continuing to transact ourselves. And B), our role as that buy-side advisor has always been to help our clients identify, understand, and mitigate the risks of any transaction, whether it's tax credits or PPAs or natural gas procurement. That's always been our job, and we're biased, but we think it's perhaps more important now than ever. 

MO: Absolutely. Certainly in our work with direct buyers at Crux, we get those questions, as well. The other thing I'd highlight, which you already picked up on, is that now is a great time to get in the market. We have some data on seasonality that really shows the benefits from a pricing perspective of getting in the market a bit earlier in the year. 

ML: You beat me to it, Madisen!

MO: Well, I'd love to go there. For those folks that are newer to the market, what do you see as the principal benefits of those purchases for buyers, and why is now a good time to be thinking about getting involved in the space?

ML: I'll share a little bit through the lens of our own procurement because we have done a variety of deals, and the benefits of those deals have been different based on the transaction and where we were in our own journey. Maybe it's safe to assume that most of the listeners here understand the importance of supporting the energy transition through investments in utility-scale battery storage or domestic solar manufacturing, whatever the case may be. But our first transaction came at a point where the transferability market was just emerging, and Schneider was a little behind, frankly, on our own renewable energy goals. And it was around the same time that our tax credit practice was gaining momentum. 

So again, this is all public, but the ENGIE deal I referenced a few minutes ago, it was really two parallel deals. On one hand, we made a significant investment in investment tax credits from several storage projects, and on the other, we bought about a million RECs from solar projects in ENGIE's portfolio. Together, those two deals were roughly cost neutral to Schneider and allowed us to achieve two primary objectives: One was to meet our North American Scope 2 emission reduction target at effectively no cost, and two was to demonstrate to current and prospective clients our strong belief in transferability by leveraging it ourselves. 

Other companies might call that eating their own dog food. Schneider is French, so let's say we were drinking our own champagne instead. And our follow-on deals, one of which was with Crux, now that we've achieved those Scope 2 reductions and really proven the concept, well, we really appreciate the reduction of our effective tax rate. I don't think there's any shame in acknowledging that as a key driver for our follow-on transactions.

MO: No, absolutely. And again, you really hit home the unique vantage point that you have in the market, given your role at Schneider and the company's approach to transferable tax credits. Wanting to frame this up from the perspective of buyers who are new to the space, how would you recommend they think about the different types of tax credits and what would make the most sense for them? And from your perspective, what makes a credit a good fit for a buyer? 

ML: It's sort of continuing the last topic, right? It's so crucial to figure out that definition of success for you, because it's going to be different than the definition of success for others in the market. We've had some buyers tell us the most important thing was to generate enough tax savings to pay for a certain number of RECs. Just break even between the two transactions. That is success. Others have said, “Hey, we need to generate a specific amount of overall savings for the juice to be worth the squeeze.” Others are really focused on supporting projects that have more direct connections to their industry. So I think — separate PTC or ITC or RNG or 45X — I think really understanding what you are trying to accomplish and having that serve as the North Star will trickle down in terms of what credit types, what asset classes, what pricing thresholds, what volumes are going to be a good fit for you as a buyer.

MO: That really dovetails with your earlier comments about that stakeholder alignment and making sure that you're aligned on what that North Star is as soon as possible, before you embark on the journey. When you think about the 2025 market — and using 2024 as a reference point, we know that the market's growing larger, more competitive. What do you recommend to buyers and corporate taxpayers that they do to stand out in the environment? What should they be thinking about if they want to get the best deal? 

ML: We have the tremendous fortune to serve many of the biggest and most successful companies in the world, and in some cases, these companies can be used to suppliers really bending over backward to work with them. There has sometimes been a bit of a learning curve for our clients that with tax credit, specifically, they might benefit from taking a bit of a different approach to their procurement bidding negotiation strategy, especially for that first transaction. The first deal is always going to be the hardest one, right? 

Tax credits can be very different to what they're used to, whether it's raw materials or PPAs or electricity. So we think our job is to really highlight all the various levers that buyers can use to make their offers stand out, whether that's pricing, whether that's commercial terms, whether that's insurance requirements or perhaps a lack thereof, whether that's payment timing or opportunities for repeat and expanded collaboration. Then it's a matter of digging into the specific items that are most important to the seller, because those can really differ as well, in hopes of creating that win-win situation. It's strategic. It's being thoughtful. It's not just throwing out term sheets without much consideration of what the market will bear for that type of credit. We spend a lot of time on the strategy of this procurement effort. 

On the timing piece, I suspect it's clear that the first half of the year is more of a buyers’ market for those current-year credits, with lower pricing. The second half tends to turn into a bit more of a seller's market. We have no reason to think that will change in the coming years. So one of our key recommendations is to accelerate transactions early in the year, whenever possible. Even if they're still finalizing their liability, do an initial transaction early, start shorting your quarterly payments, and then maybe do a top-up transaction later in the year once you have that additional visibility. That's proven to be a pretty successful strategy. 

MO: I think that's something that, particularly for first-time buyers, can be really important to highlight. I want to shift gears now just a bit to risk mitigation. What do you recommend buyers think about in terms of risk mitigation, and to what extent do you anticipate that this may evolve throughout 2025?

ML: Our primary recommendation is, not all these credits are created equal. One of the things we actually recommend is not applying hard and fast rules with respect to risk mitigation. For example, we don't recommend requiring tax credit insurance on every deal. We don't think that's the right move. Our approach is always to look at the specific transaction, the credit type, the step up if it's an ITC, the adders, the seller's profile, where it is in its development, what equipment has been procured, the partnership structures and really determine what protections are appropriate and cost effective. I hope I'm not sounding like too much of a broken record, but the head of our practice says all the time, “It depends.” There are very few broad answers to what should or should not be done in a specific transaction. It really depends on so many different variables.

MO: Absolutely. I think that there are themes that come through in risk and mitigation, and different solutions for buyers to protect against those risks. I like that you're highlighting the nuances of certain deals and that folks should be strategic, because they're evaluating opportunities.

I'd love your perspective on what we're missing. Is there anything that we haven't discussed in the conversation yet that you think buyers should be particularly aware of?

ML: We've talked about this a little bit, but coming back to that internal alignment and stakeholder engagement. To add a little more color on that topic of why it's so important for many of these clients, we're helping them pursue their first tax credit deal of any type, and for almost all their first ITC or PTC purchase. We often spend months with these clients ensuring that the right functional groups are educated on the topic, understand the benefits, understand the risks, understand the process. These groups can include tax and treasury and finance, internal legal, external legal, and, if decarbonization is a goal, sustainability. Investing that time and that effort to really define that investment criteria and secure those necessary approvals before going to market typically results in a much smoother, much more efficient transaction and increases the likelihood of success.

MO: Well, thank you so much, Mat, this has been a very insightful conversation. I came away with some new lessons learned. And again, we've so enjoyed our partnership with you all at Schneider, and we're excited to hopefully have you back on a future episode as well. So thanks again for making the time today. 

ML: Thanks so much, Madisen.