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‘The road to net zero will not be paved by good intentions’

‘Achieving net zero: where will green investment come from?’ was the first session of Scaleup Week 2022.

In the session, panellists considered the funding models and ecosystem required to untap green investment into UK scaleups. They were asked, who is driving the investment agenda for sustainable innovation and ‘good growth’? How can the UK unlock more domestic and international capital for scaleups engaged in good growth and low carbon technologies?

The session began with Stephen Welton, executive chair of BGF. “The danger is in a period of downturn we lose sign of long-term objectives,” he warned. “The road to net zero will not be paved by good intentions. It has to be paved by substantial investment.”

Welton called for specific changes to unlock tens of millions of incremental investment each year into technologies and businesses that could help achieve net zero greenhouse gas emissions.

Raise the ambition

The session then turned to an interview with Dr Sally Uren, chief executive of Forum for the Future, an organisation that seeks to accelerate the green transition by working alongside organisations to craft “ambitious transformation strategies”.

“Now has never been a better time to get really ambitious about understanding your role in creating a sustainable future,” she said. “We need to raise our ambition level and get on with things.”

She counselled against a pessimistic view that the current cost of living crisis would lead to underinvestment in sustainable initiatives; it should be the other way around. “Accelerating how we approach sustainability could be one of the ways we weather a recession,” she said.

From the ‘what’ to the ‘how’

During the main panel discussion, Juliet Davenport, founder and former chief executive of Good Energy, said there were several challenges facing the net zero strategy. Turmoil in energy markets has led to economic and political uncertainty. Regulatory systems in different parts of the world are not equally advanced, leading to difficulties for companies that want to ‘green’ their supply chains.

Nicolas Moreau, CEO of HSBC Asset Management, shared these concerns, however he said he was encouraged to see the mood among delegates and policymakers at COP26 turning from the “what” to the “how”. Finance is crucial in fuelling opportunities ranging from green energy to optimising grid management and more. However, he noted that some projects require government action.

Claire Dorrian, head of sustainable finance at Capital Markets, stressed that what is under discussion is a multi-year, complex and capital-intensive exercise. What was important was to ensure that pledges turn into action. She added that, as well as cutting global emissions, it was important to achieve a just and socially acceptable transition.

Stephen Welton added that one of the opportunities available in the push for net zero was that it would be a nationwide initiative, which would create high-quality jobs across the UK. However, it was important to look beyond sectors that have already seen significant progress, such as offshore wind, to the more challenging areas, such as aviation, agriculture and construction.

Andy Shovel, founder and co-CEO of THIS

Reformed meat lover

The panel was interrupted for an interview with Andy Shovel, founder and co-CEO of THIS, a BGF-backed alternative meat business. He described himself as a “reformed meat lover”, who turned to plant-based meat alternatives after founding and selling a meat-based restaurant business. Today, THIS products are sold to a range of clients including supermarkets and restaurant chains.

Shovel was asked whether his brand’s sustainable credentials had assisted it in raising money. “In the beginning it was a feather in our cap to be a sustainable business,” he said. However, he believes the large number of sustainable startups coming to market today make it less easy to stand out.

Shovel said the presence of leading venture capital and growth funds in the UK made it a good place to start a business, but said that in certain sectors, such as food technology, Europe and the US have a more thriving infrastructure.

What could the UK funding environment do to improve? He said it would help if the government were to systematically facilitate introductions between innovative startups and large corporates with money to invest.

Shovel ended the interview with advice for entrepreneurs raising money. Provision for the best case, he said. Chart forward three to five funding rounds, and make sure your equity position will be satisfactory at that point. “Tap into key inflexion points when your business has the most leverage to raise capital, and raise as much as you can – raise more than you think you need.”

BGF Insights 09.28.2022

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