Clean Growth Fund’s Managing Partner, Beverley Gower-Jones, and Gershon Cohen, CGF Advisory Board member, recently hosted an insightful roundtable with Pensions for Purpose focused on the challenges of decarbonising Scope 3 emissions. 

It was encouraging to see such active engagement from the investor community, sparking valuable discussions with a lot of thought-provoking questions. 

Key topics included decarbonisation as a competitive differentiator for corporates, the critical role of deep sector expertise in climate tech investing, and the enormous opportunity that the low carbon transition represents to the UK to grow our economy, provide local jobs and futureproof industries. 

The Urgency of Decarbonisation
Beverley began “corporates know that to stay competitive, they need to decarbonise their operations, products, and supply chains… but of course, this is just the beginning of their journey to a profitable future.” They are starting with the basics, like switching to green electricity, but it’s agreed decarbonising the supply chain, to ensure profitability and make a lasting impact needs technology solutions. 

Emerging Technologies are Key to Reaching Net Zero 
A large chunk of the carbon reductions we need, 35%, will come from technologies that are still emerging and a further 40% from those not yet commercially deployed. “Cleantech has already emerged with huge potential. We need to look beyond just one or two options so that we get to net zero quickly without being over reliant on any one technology.”   

Investing in Cleantech 
While renewable projects have been the more familiar investment, “modest returns” are leading investors to seek out other options. This is where cleantech comes into play, offering significant growth potential but also certain risks. Gershon continued, “To meet investor Net Zero targets with acceptable risk-adjusted returns, cleantech can’t be avoided… the challenge is how to access the opportunity safely.”

World-Class Emerging Technologies 
Some leading UK innovations coming out of the UK discussed included: 

• Clean Food Group: Their work to create a yeast-based alternative to palm oil was described as a game changer. One speaker noted that our global obsession with palm oil has “seen nearly an eight-fold increase since 1990,” and this innovation could be the answer to both sustainability and profitability. It was also mentioned that this new palm oil substitute is already being tested in Oreo cookies! 

• SunSwap: This UK start-up is replacing diesel-powered refrigeration systems with electric, solar-powered ones for refrigerated transport. Their innovative partnership with Scottish manufacturer Gray & Adams shows how UK companies can work together to “differentiate from large incumbent players” while creating local jobs. 

• Holiferm and Futra Heat: In addition to petrol and diesel there are 6,000 products that come from the fossil fuels. The last barrel of oil will be produced not for petrol but for the petrochemicals we so heavily rely on. Finding a single replacement will be impossible and so many different innovations are needed. From replacing petrochemical-based surfactants in household products to recycling industrial waste heat, these companies exemplify the cutting-edge solutions emerging from the UK’s cleantech ecosystem to decarbonise the industrial sector.

Gershon explained that inevitably new carbon abating technology will represent a venture-type profile, however, a key mitigant to this investment risk will be understanding the practical nature of the solution and how it can be scaled. Historic innovation of technology for example in the hydro-carbon industry and the success in bringing this new technology to market is not new and the process and governance that delivered can be replicated and modified for clean technology.

Q&A 

Private Sector Leadership 
Participants asked how cleantech investments are being supported at a policy level. Beverley, who serves on the UK government’s Net Zero Innovation Board, discussed her work to push for climate tech policies that will make a difference by working with portfolio companies and government to trial new policies such as a salary sacrifice scheme for home owners to retrofit their properties for increased energy efficiency. “We can’t wait for the government to do everything,” she explained, “the private sector has to step up—there’s no shortage of capital waiting to be unlocked.” The transition is the largest economic opportunity the world has ever seen, bigger than all previous industrial revolutions combined. There is huge commercial benefit for private companies and investors.  

Balancing Returns and Impact 
Another question posed was “how do you balance returns versus impact when evaluating your investment?”. Beverley answered “return on capital is paramount. We know that our institutional investors are looking for that return for their savers, and so that’s absolutely fundamental, but we firmly believe that you can have profit with purpose”. We look at something we call a ‘return on carbon’, the cost per ton of abatement for each company in the portfolio. I have an internal target that a company needs to be able to show it abates to be significant. This analysis is all shared with an independent assessor and our Investment Committee, and it’s a key part of the decision making. We then evaluate that on an annual basis, alongside the social and the governance questions and we recently received a special recognition award from the BCVA for our excellence in ESG last week. Investors want strong returns, but they also care about impact.  

CGF Differentiation 
“When you are looking at doing VC investments into climate tech companies, the thing you really, really need is deep sector knowledge. I founded Carbon Limiting Technologies, a consultancy to help low carbon entrepreneurs commercialise technology, back in 2006, before anybody cared what climate change was”. “Working with those companies, we have built huge, deep sector knowledge in all those sectors, and that’s what really counts when you’re choosing the right companies to invest in, that’s the thing that really makes the difference” Beverley stated. Today CLT provides hands on support to the companies in the CGF portfolio, helping them address barriers to commercialisation and accelerating their journey to profitability. CLT has 40 associates each with over 20 years’ experience in their chosen domain allowing focussed, expert support to be delivered to all our portfolio companies. 

Opportunities for Early Investors 
The webinar ended with a clear message for investors – get involved early. Gershon advised, “Waiting for everything to be nicely packaged? By the time that happens, it’s already too late and heavily competed.” This sector, especially cleantech, rewards those who are willing to take some risk early on.

The event made it clear that the cleantech sector is ripe for investment, innovation is happening fast, and both government and private investors have crucial roles to play.

Beverley concluded “the climate transition is a global economic opportunity, and one where we can play an enormous role. Yes, there is risk, but it comes with commensurate reward and growth, and growth is local jobs, which is absolutely critical”.