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Delivering Sustainable Growth: Insights on Investment Partnerships – by Ian Thomas, Managing Director at Turquoise

Ian Thomas, managing director at Turquoise
Ian Thomas, managing director at Turquoise

In the growing field of sustainable investment, partnerships are a proven method of driving forward innovation and delivering measurable impact.

Ian Thomas, managing director, Turquoise, draws on the insights from its partnership with specialist investment manager Redwheel to outline the opportunities for investors in the ClimateTech sector. 

Venture capital (VC) investment activity is on the rise in the UK. Overall, UK start-ups gained $21.3 billion in funding last year, the third-highest total on record, securing more VC funds than France and Germany combined. In part, this increase was due to a rise in ClimateTech investment, also a growing field. Although dominated (unsurprisingly) at a global level by the US, China and India, in 2023, ClimateTech investment comprised 29% of all UK VC investment, $6.2 billion in total, achieving 40% year-on-year growth. 

There are a number of reasons why the UK is an investment hotspot in this sector. Innovation is driven by our universities, by companies and by government backing and tax incentives, especially at the inception stage. However, when businesses look to progress beyond start-up status into the growth phase, funding becomes harder to access. This is the state of play not just in the UK, but more broadly across Europe too. In order to address this issue, a huge source of frustration for growing businesses, the UK needs more, experienced lead investors deploying larger amounts of venture capital. 

Additionally, ClimateTech is quite distinct from the software arena that previously consumed VC interest. ClimateTech businesses require higher levels of initial investment. The ticket size of major climate technologies in early-stage VC are an estimated five to six times higher than in fintech, for example. High-impact solutions such as carbon capture and transport electrification, require significant capital before production begins. 

Conditions are clearly favourable for future growth – but growth that must be leveraged correctly to gain momentum. 

A new fund 

Earlier this year, Turquoise announced a partnership with specialist investment manager Redwheel, set up to launch a growth-stage UK ClimateTech venture fund in a move that sees Redwheel enter the VC market for the first time. The Redwheel-Turquoise ClimateTech Fund (RTCF) has been established to exploit the growing need for growth capital for UK companies developing low-carbon technology, or services that address environmental challenges and promote sustainability. Combining Redwheel’s access to institutional capital with Turquoise’s long track record of working with corporate investors, RTCF will lead investments in companies seeking to reach their next stage of growth. 

The right experience 

Our experience made us an ideal partner for Redwheel. Turquoise has significant expertise in investing in ClimateTech, with a 21-year track record of over 140 completed transactions. Via the Low Carbon Innovation Fund 2 (LCIF2), managed by Turquoise, we’ve invested in a hugely varied range of businesses including Skoot Eco Group, creator of software to allow carbon offsetting in the hospitality industry; Net Zero Now, a carbon accounting platform for SMEs and aircraft seating company Unum, which is redefining business class comfort around lightweighted seats with carbon consumption being measured on each part manufactured. We have been there many times over the years and are well known in the ClimateTech entrepreneur community as a source of expertise and connectivity. 

Measurable impact

Currently, the Redwheel-Turquoise team is working to identify promising post-revenue and growth-stage companies with a demonstrated potential to disrupt their industries in the near term, with a strategic focus across energy, transport and mobility and resource efficiency. Together, we will identify investment opportunities with potential for strong financial returns, while delivering measurable positive climate impact measured using a rigorous, independently designed methodology. 

Turquoise will hold responsibility for the day-to-day management of the fund, with Redwheel acting as the fund manager focusing on governance and investor reporting. We believe our partnership has the potential to vastly accelerate how quickly ClimateTech companies are able grow and expand, by increasing their access to later-stage capital.

Investing in our sustainable future 

Partnerships can provide a valuable learning experience for both parties, yielding expert insights into new industries, financial markets and investment strategies. In the future, the UK’s sustainable investment landscape will focus on nurturing technologies that not only deliver strong financial returns, but also generate environmental resilience. With Redwheel, we look forward to furthering ClimateTech investment and to bringing to fruition the sustainable technologies that will shape our collective future. 

For more information, please visit https://turquoise.eu/

VCWire

17/05/2024