Over the past decade, Green Angel Ventures has been leading the way in investment in climate solutions. But what does investment in climate solutions mean, and how is making a positive contribution to the fight against climate change compatible with getting attractive financial returns?
What is the climate investment opportunity?
By investing in climate solutions, we mean backing the most innovative, fast growing early-stage companies whose activity directly cuts greenhouse gas emissions, or helps absorb carbon dioxide from the atmosphere.
We all know that in order to avoid the worst consequences of climate change, we must cut the world’s carbon emissions to zero by 2050. And we understand that this requires a radical transformation of key sectors of the economy: energy, transport, buildings, industry and agriculture.
This is, of course, a huge challenge. But in our eyes, this is also a trillion dollar investment opportunity.
Indeed, our investment thesis is to seek out today’s early stage companies that we expect to become winners of tomorrow’s net zero economy.
And we are not alone in seeing it that way. BlackRock’s CEO Larry Fink recently claimed that the next wave of billion dollar startup companies will be in climate tech.
Given this huge long term potential, it is no surprise that climate tech is one of the few growing sectors of the early stage VC investment market. And it is no surprise either that more and more entrepreneurial talent is shifting to climate tech.
Building a leader in early stage climate investment
Many years ago we started by founding an angel syndicate specialising in the fight against climate change – and Green Angel Ventures has since then become a leader in early stage climate investing.
We have more than 300 active members, who work with us to select the best deals and support the companies. Through this body of active investors and participants, Green Angel Ventures has built up an extraordinary centre of expertise.
We have a strong track record, having deployed a total of £40m into 44 companies, which have gone on to raise more than £200m from external investors – a clear enough indication that we have been building a portfolio that counts many future winners.
And we select these from a rich and established deal flow. Having been at the centre of the UK climate tech scene for many years, we receive more than 800 applications a year from exciting early stage companies across all UK regions, covering not only the energy transition, but also the decarbonisation of industry, transport, buildings, food, agriculture and nature.
Finally, as a specialist climate investor, we measure the impact of what we do for climate change – and this is done in terms of carbon emissions reduction. So far, overall, 158,000 tonnes of CO2e have been avoided thanks to the innovations developed and commercialised by our portfolio companies – and this is just the beginning of course.
Naked energy and low carbon materials – exciting growth and massive impact
One great example of a Green Angel Ventures portfolio company is Naked Energy, a fast growing startup decarbonising heating. Heating, including space and water heating for buildings, accounts for half of energy consumption globally – a huge source of carbon emissions.
Naked Energy’s solution is a unique type of solar collector, called Virtu, which is delivering 3.5x the CO2e savings per square metre of traditional solar solutions, and a lower levelised cost of heat. Each installed Virtu tube cuts carbon emissions by tens of kilograms each year.
We first invested in 2018, at prototype stage. Since then, Naked Energy has raised £16m from a range of institutional investors. Its product is now certified, with global distribution and outsourced manufacturing in place, and ~100 completed installations. With commercial sales accelerating and a pipeline in the hundreds of millions of pounds, Naked Energy is now raising a Series B round.
Our second example, Low Carbon Materials, combats climate change through material innovation – starting by tackling the huge emissions from concrete production, which is responsible for 8% of CO2e emissions globally.
The company, founded by PhD Chemists Natasha Boulding, Phil Buckley, and Scott Bush, has developed a first product, OSTO, a carbon negative lightweight aggregate partly made from non-recyclable waste plastic – which would otherwise be incinerated, releasing carbon, or damaging environments and communities in landfills.
By contrast, OST stores carbon permanently and reduces the world’s reliance on carbon-intensive aggregates.
Green Angel Ventures and the EIS Climate Change Fund invested in Low Carbon Materials in 2021 and, since our investment, the company has made excellent progress in R&D, product development, commercial partnerships and early sales.
Low Carbon Materials also gained international attention, having been selected as one of the three global finalists in the Fix Our Climate category of The Earthshot Prize 2022.
2024: The year when sustainable investment becomes mainstream
At the recent COP28 international summit, global governments have set a clear direction of travel: the world needs to get off fossil fuels and make the transition to a sustainable economy.
To enable this transition, finance is an essential tool – at all levels, from traditional banking solutions that support large corporations around the world, to the high risk high reward domain of early stage investing.
The UK’s Financial Conduct Authority (“FCA”), conscious of the key role that finance should be able to play, has recently published an important package of measures to improve the trust and transparency of sustainable investment products and minimise greenwashing.
In particular, the FCA is putting in place new Sustainability Disclosure Requirements and a new regime of investment labels – which should help consumers understand and pick investment solutions according to their sustainability commitments. This is to make sure that the supply side is more transparent.
On the demand side, the FCA is also pushing investment advisers to ask their clients to express their wishes with regards to sustainable investing. Indeed, understanding one’s client’s investment objectives is a must for advisers, as part of the FCAs Consumer Duty rules introduced in 2023. We know that for more and more people, sustainability is an increasingly important objective.
All these trends are converging to make 2024 the year when sustainable investing takes centre stage.
Green Angel Syndicate EIS climate change fund – the natural choice
In such a context, Green Angel Ventures’ EIS Climate Change Fund is a natural choice for both advisors and investors. Our ElS fund has an unequivocal objective to back early stage companies developing solutions to climate change, whilst targeting a financial return of 3x over 5-10 years.
As one of the very few specialist ElS funds focusing entirely on the fight against climate change, as an attractive investment solution and tax planning tool, and as a planet positive choice, the EIS Climate Change Fund will be of interest to our clients – and deserves all your attention. Please get in touch!
To find out more about Green Angel Venture’s EIS fund, access your complimentary of the EIS Annual Report 2024 here
