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Why Government support means there has never been a better time for sustainability start-ups

When Glasgow hosts the United Nations Climate Change Conference in November, it will be more than two years since the UK signed into law its commitment to a net zero economy by 2050. With the government now working on achieving this goal, a flurry of new incentives, grants and other initiatives will support those who want to set up, invest in and grow start-ups that are focused on tackling sustainability challenges. Jake Wombwell-Povey, Vala Investment Director, Sustainability team, explains everything you need to know.

UK Government Budget 2021

Rishi Sunak’s March 2021 Budget set out measures designed to support companies operating in strategically important sectors. This included the announcement of ‘Future Fund: Breakthrough’, a £375m scheme that will invest in innovative companies that are seeking at least £20m of funding. Overseen by the British Business Bank, the scheme will match the funding provided to start-ups by established venture capital investors.

Rishi Sunak also announced the launch of a consultation which will look at broadening existing Research and Development reliefs, which allow companies to claim an enhanced tax deduction or tax credit in relation to the cost of R&D.

Financial support will be complemented by other changes designed to support innovation. For example, proposed reforms to the UK’s Global Talent Visa will make it easier to hire scientists, researchers and mathematicians from around the world. A government-backed review has also recommended relaxing London’s IPO rules in order to attract more tech company listings.

Funding the ‘Ten Point Plan’

In November 2020, the government announced its Ten Point Plan for a Green Industrial Revolution. This plan commits £12bn of government investment to ten goals, including developing offshore wind, creating new nuclear power technology, zero emission transport, sustainable aviation and carbon capture. Grant funding is available for companies operating in some relevant sectors, and the plan also includes prize incentives, such as the Jet Zero Council’s £15m competition for sustainable aviation fuel innovation.

Last year, the government provided £134m in grant funding to more than 1,000 sustainability companies across the UK, developing technology for sectors including renewable energy, waste reduction and compostable packaging.

Overall, there is a clear intention to provide financial support to innovative companies that have potential to address the government’s sustainability objectives.

Regulation to drive change

Environmental regulation and legislation will also support innovation, building demand for sustainable products and services by creating the impetus for consumers and big corporates to change their ways.

For example, a number of governments around the world have announced plans to phase out the sale of petrol and diesel vehicles. Norway leads the pack with a 2025 target, while the UK is aiming for 2030. Such laws will drive demand for electric vehicle charging infrastructure and incentivise innovation in both the electric car market and in developing alternative fuels, such as hydrogen and ammonia.

Similarly, recent UK and EU rules to limit single-use plastics, reduce waste and increase product lifetimes will create opportunities for companies focused on the challenges presented by making our economy more circular. Examples of these challenges include traceability (monitoring the origins and usage of materials through the supply chain), reverse logistics (ensuring used products are efficiently collected and recycled) and waste mining (salvaging reusable materials from general waste).

Partnerships and accelerators

Government support for sustainable business makes the sector attractive to investors, and the number of start-up accelerators is on the rise. TechNation’s Net Zero, Bethnal Green Venture’s Tech for Good and the Sustainable Accelerator are all great examples of UK-based sustainability accelerators.

In addition, some large corporates are seeking to address sustainability by partnering with start-ups. Unilever has announced €1bn of funding for start-ups as part of its “Clean Future” programme, which aims to eliminate Unilever’s carbon footprint and boost the recycled content of its cleaning products by 2030. Meanwhile, Amazon has created a $2bn fund for climate solutions, and Tesla recently launched a $100m carbon capture technology competition.

Unprecedented opportunities

The current collective effort to find climate solutions by governments, businesses and investment groups is unprecedented.

With huge demand for technology that can address the key sustainability challenges we face, innovative start-ups that develop effective products and services have the potential to achieve scale quickly. As momentum builds to transition to a greener economy, there has never been a better time to build sustainability-focused businesses.

Jake Wombwell-Povey joins Vala as an Investment Director in the Sustainability team and is responsible for investments in to the Sustainability Funds.  He is the founder and former CEO of Goji, a fintech asset management platform. Jake led the company through a number of VC-led investment rounds from some of Europe’s largest fintech VCs including Axa and Anthemis.

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