Investment Into Green Technology

Issue 82

Steve Plaskitt, Corporate Finance Partner at Azets looks at the move to Green Tech Private Equity.

The UK transport sector contributes 28% of the country’s carbon emissions, therefore transport must play a role in the UK’s green agenda. With 1 in 10 new cars sold in the UK last year being electric or hybrid this highlights some moves being made to support this, resulting in infrastructure changes and the move away from fossil fuels. Albeit slowly.

Importantly though, the world of business and private equity investors is quickening the pace of change – green tech investment has kickstarted.

It is not just the electric car market that is starting to change, construction companies in particular are keen to demonstrate their green credentials and how they intend to meet the sustainability agenda. Companies are beginning to describe themselves by their commitments to sustainability, biodiversity and Net Zero as much as by their turnover and profit.

So how will green tech investment drive the environmental agenda and how quickly is this happening already? Fundraising statistics (using Beauhurst) show interesting trends: There is an increase in the number of urban farming, precision agriculture and green tech companies being created and a shift away from biomass or clean energy companies which had been the initial focus of Government support and its feed in tariffs

Of almost 1,000 green companies in the UK, 40% are now involved in technology or are rich in intellectual property.

These green tech companies have seen a huge uplift in the number of fundraisings with 2021 alone raising 25% more funds in the first half of the year than the previous peak in the whole of 2017.

At this rate UK green tech investment will increase by 150% by the end of this year to £1.5 billion.

More specialist green tech funders are appearing and have stated agendas from tackling the waste mountain and reducing the environmental cost of plastics, to addressing the shortage of green social housing and the high carbon footprint. With the top 20 investors accounting for fewer than 20% of all the equity fundraisings and 94 green private equity and venture capital funders in the UK, SMEs have a lot of choice when raising money.

Until recently, many green tech funds were focused on the big problems and the larger Government-led projects that would address them. Increasingly as they turn their attention to the SME market, they see many likeminded small and medium sized companies determined to let their staff and customers know that they are transforming to address green issues.

As investors are becoming aware of the importance of investing money to address the climate emergency, so too are entrepreneurs and company directors, and this should give us all hope for a healthy future for us all and the planet.

At Azets, we have acted on deals for businesses that seek to address some of these issues – from efficient ground source energy for social housing to the roll out of the electric vehicle charging infrastructure – and we see more opportunities in the coming months.

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