Cleantech start-ups pitch for cash amid surging enthusiasm for green investing

Last week brought a slew of tough news for the green economy. Global greenhouse gas emissions are still rising. Countries have made "almost no progress" on greening their energy systems. And in the UK at least, Brexit chaos continues to cast a long shadow over politics, crowding out meaningful debate on almost every other policy area including climate matters. 

Amid the gloom, it is all too easy to miss the genuinely exciting and impressive work underway to drive low-carbon growth across the UK economy. There are some incredibly smart people out there working tirelessly to achieve some amazing things, and some of their ideas could utterly transform our economy for the better. 

To shine a spotlight on the positive developments, last week BusinessGreen hosted its fourth Technology and Investment Forum in association with Innovate UK. The event once again saw a dozen entrepreneurs given four minutes each to pitch their green ideas, in the hope of winning financing and support from a raft of experienced investors. From carbon capture technology and air pollution filters to flat wine bottles and fuel-saving aircraft designs, a huge range of innovative ideas were on offer.

For all the young start-ups, there was a great deal of entrepreneurial knowledge to soak up as well. Jeremy Leggett, founding director of Solarcentury, kicked off proceedings with a "report from the frontlines of the transition". 

His fascinating keynote speech was a whirlwind tour of the environmental challenges the world faces, and of the huge opportunities these challenges create for forward-thinking, climate-aware entrepreneurs.

Leggett began with the positives, highlighting the clearest examples of where the green economy is now flourishing. "It is economics that is really driving the transition," he stressed, pointing to the huge cost reductions in renewables technologies, especially wind and solar. "It is quite remarkable how fast this has happened over the past decade or so. We are actually beginning to see coal power plants shut down because it is cheaper to own and operate renewables."

Renewables are set for an extra boost in the future as digitisation ushers in new opportunities for green power to integrate with the built environment, through battery installations and smart grid technologies, Leggett added. Meanwhile in transport, electric vehicles are starting to overtake combustion engines. "It brings up an endgame [for fossil fuel cars] that would have been dismissed even five years ago as rootless dreaming," he said.

But while maintaining his characteristic optimism, Leggett, a former Greenpeace climate campaigner, was also quick to point out the many challenges ahead. The world is still nowhere near on track to reach the Paris Agreement goals, he said, and it will be an "incredible challenge" to get there. "Can it be done? Is it remotely feasible? Well actually yes. Historically, in terms of the rate of tech change, this is not unprecedented," he explained.

But for any hope of success, more money is needed. Yet as Leggett pointed out, green investment is a better option on almost every level than business-as-usual investment. "The investment challenge in meeting the Paris Agreement, is essentially, to keep the world going we are going to have to spend $90tr by 2030 whatever we do - whether it's dirty or clean," he said. The difference is that if we were Paris compliant we would yield $26tr in direct economic gain."

That's where the investment industry comes in. The choices investors make in the coming years about where to put their money will determine whether we win or lose the climate battle.  

 

"If it is the case that net prosperity will increase in a Paris-compliant world, then why aren't we doing it? Because we are all stuck in a stasis of status quo behaviour as investors and energy firms," Leggett added. "Investment can change that. I would argue we are on the cusp of that changing."

Leggett may be right. At BusinessGreen we are increasingly reporting on changes to investment strategies across the the investing world, from Paris-aligned investment strategies at global banks to spiking venture-capital interest in promising new industries such as plant-based food production.

Delegates next heard from four green investment experts working at the frontline of this shift. 

All celebrated the sheer volume of innovation in the space, but warned that while there is no shortage of good ideas, there's still not enough green investment capital sloshing about the UK to fund the transition. "We are getting two enquiries every single day from companies wanting to raise money in this space," said Cam Ross, director at Green Angel Syndicate. "But it is a real struggle."

Although initial seed funding is increasingly accessible, moving up a level to secure funding of around £5m upwards usually presents the biggest hurdle for green entrepreneurs, explained James Cameron, chairman of the Overseas Development Institute think tank. "My lived day-to-day experience on behalf of companies I chair, is that it is still too difficult and too inefficient to connect businesses to the next level of funding," said the trained barrister, who has a raft of investment experience and company chairmanships under his belt. "We do have to get better at finding the capital that allows an idea to scale."

Brexit isn't helping, added Mark Riminton, investment platform manager at university-led business network Clean Growth UK. The UK's withdrawal from the EU is further reducing the amount of available capital in the green economy, he said. Larger companies - not just investors and asset managers - needed to step up to the plate and help nurture clean tech start-ups, he said. "Two weeks ago I was at a corporate event in Paris and it was clear then that corporates do have a role to play in that scale up, access to market, product trialling space," he explained. "We heard some really exciting case studies there about things that are working well, and we hope to have corporates involved [in the UK] as well to help solve this problem."

The challenge of moving significant sums of money away from fossil fuels towards other sectors was another key topic among the speakers.

Amanda O'Toole is a fund manager at AXA Investment Management - which has made high profile efforts to move its money away from coal in recent years. Shifting money divested from one sector straight into the green economy is a hugely complex task, she explained. "It is not straight forward," she said. "You've sold the product to somebody on one set of metrics, you can't just shift that over somewhere else."

In some cases, it could mean investing money in a bank, which might then in turn fund a number of high carbon assets - therefore effectively only shifting the investment further along the chain, O'Toole warned. After all, environmental risk data on companies is often scarce, which renders reinvesting in any sector fraught with difficulty. "I can't tell you how difficult it is, especially in some of the emerging markets we work in, to get the data we need," she said. "It is getting better, but we as an industry need better disclosure for sure."

Cameron, from the ODI, agreed. "You can't do a dirty to clean swap out," he said. "You can switch to dividend yields, you can change your rankings in your portfolios, and you can buy indexes and decarbonise indexes. You can do all that and it makes a difference, provided you can scale."

However, Cameron suggested a "big break up" of the major banks and funders might be necessary to yield the levels of green investment required. "I don't believe the big incumbents are going to be the ones to lead this transition," he said.

The though-provoking discussion set the stage for the invigorating round of pitches that followed, with 14 entrepreneurs touting their business ideas and fielding questions from investors in the audience.

Data was king among some of the standout ideas. Minibems' intelligent heat network service, for example, promises to cut fuel use by up to 40 per cent by using data to aid decision making and problem solving on heating and boiler use. Meanwhile, Verv Energy's home hub gathers data to provides householders with information on the energy costs of individual appliances in the home, among other services. And in a similar vein, start-up Deep Ventures pitched its Energy Open Piazza as software platform designed to help landlords, investors, developers and property managers assess the costs and returns of microgrid projects. International Power Generation, MicroGen Renewables and Ripple Energy were yet more exciting firms pitching in clean energy space.

Other start-ups focused on cutting fuel costs - and emissions - in transport. SOMI Trailers CEO Pauline Dawes explained her novel idea to vastly expand the carrying capacity of truck trailers, while Garçon Wines presented what it claims to be the world's first flat, plastic wine bottle, designed as a lightweight, 100 per cent recyclable alternative to traditional glass round bottles. And focused on air travel, Meteor Power CEO Mike Edwards explained how his firm's innovation could reduce the drag on aircraft wings by up to 25 per cent, thereby cutting turbulence, noise and - crucially - fuel costs.

Elsewhere, Winnow Solutions - which is already working with IKEA - wants to prevent $1bn of food waste from commercial kitchens by using enhanced data collection to drive behaviour change, and Tensei's use of renewable, agricultural offcuts to produce fibres aims to reduce the world's unsustainable reliance on fabric and wood-based fibres across myriad industries.

And finally, Origen Power's carbon capture technology, Airlabs' air pollution filters, and HiETA Technologies' efficient metal additive manufacturing technique rounded out a morning showcase of potentially game-changing innovations, with each of the 14 pitchers now hoping to attract funding and support to take their businesses to the next level.

Delivering a low carbon transition of the scale and pace needed to avert climate catastrophe is a significant challenge, but with so many bright innovators on the case there's real cause for optimism, even in the gloomiest of news weeks. 

The full list of companies presenting at the forum is available here. 

The BusinessGreen Technology and Investment Forum was hosted in partnership with Investment Week and Innovate UK, and supported by Clean Growth UK.

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