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Ideas & Observations

How green tech private equity opportunities are growing

With Boris Johnson’s new order for businesses to return to offices, owners are faced with wondering what this return will look like in reality.

In the first few weeks of the first lockdown the roads were strikingly quiet and at times empty. Local governments and the UK Government seem to have recognised this too, ushering in a transformative shift towards a greener ‘new normal’. Reducing pollution is a priority so that some of the commitments made in The Paris Accord can be met to tackle the climate emergency.

Since the whole of the UK transport sector contributes 28% of the country’s carbon emissions, this must be transformed to help progress the UK’s green agenda. With 1 in 10 new cars sold in the UK last year being electric or hybrid, the change is starting to happen and with it will come the 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.

Steve Plaskitt, head of corporate finance at MHA Tait Walker, assists businesses with finance raising and growth. With over twenty-five years of experience in the North East market, Steve shares his advice for business owners looking to take their share of green tech private equity opportunities.

Steve said: “It’s not just the electric car market that is starting to change, a range of companies, particularly within construction, are keen to demonstrate their green credentials and how they intend to meet the sustainability agenda.

“I have had meetings recently where companies have described themselves in terms of their commitments to sustainability, biodiversity and Net Zero as much as by their turnover and profit. Green tech investment is quickly driving the environmental agenda.”

Steve shares some key fundraising statistics* with business owners looking to understand the trends around green tech private equity:

  • 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.

Steve said: “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 with 94 green private equity and venture capital funders in the UK, SMEs have a lot of choice when raising money.

“Until recently, many such 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.

“At MHA Tait Walker, 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.

“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 the “new normal” to be healthy for us all and the planet.”