Green Entrepreneurship Forum: Natural Resources

On 18th November we hosted the third instalment in our series of roundtables for the Green Entrepreneurship Forum: a new policy initiative we are running with Mishcon de Reya that brings together the UK’s most successful sustainability driven entrepreneurs to help support their growth and inform us on the policies they need to flourish.

As natural resources are declining and demand is increasing, the commercial value of natural resources that benefit people are becoming more visible. At this online roundtable we discussed how companies could create benefits for both themselves and the planet by investing in “natural capital”.

Alex Rhodes, Head of Purpose at Mishcon de Reya and a Fellow at the Royal Geographic Society, and a Conservation Fellow at the Zoology Society of London, opened the discussion by looking at COP26, in particular the rules to strengthen the integrity of Carbon Markets. The WWF Living Planet Report showed that we have destroyed about 60% of our biodiversity since 1970. Alex observed that this was one of the biggest challenges for the international markets and policy, as many of the countries with significant ecosystems such as rainforests need support transitioning their economies. Alex also identified 3 areas Mischon De Reya has seen changes in relation to biodiversity: 

1. Investment markets have an increased focus on trying to understand what biodiversity is, how to measure it and how to report on it. 

2. Development companies are looking at net positive biodiversity in relation to infrastructure.

3. Changes to agricultural subsidies and that move from the common agricultural policy’s system of paying people by the acre to a new policy of environmental ecosystem based payments which the government is currently trialling.

Next we heard from Ben Goldsmith, CEO of Menhaden and board member for DEFRA. Ben shared that his lifelong fanaticism for nature started as a child, and observed that one of the fundamental problems in our society is that most people lose their connection with nature as they grow into adult life. But, he can see through his work that people are rediscovering that connection in a kind of societally important way, and that is being reflected in global policy. At COP26 policymakers are talking about climate change and nature in the same context. In the UK there are new, significant budget initiatives around nature such as the Nature Climate Fund where £750m is available for restoring peatlands and forests and the new agricultural payments regime which, after a seven year transition period, will be focused entirely on rewarding land managers for restoring nature. The UK is also at the centre of new deals around slowing and ending deforestation, restoring mangroves and creating new marine protected areas. 

We then heard from Will Wells, Founder and President of Hummingbird Technologies, an Agri-tech platform which monitors natural resources from space using imagery and deep learning models and detects climate positive switches in regenerative agriculture. He shared his perspective as a leader in the emerging climate tech landscape, which he believes will not only be a great employer but will make a huge difference to the environment. His career has focused on three big questions. 

1. How can we produce food in a way that is regenerative - whilst agriculture, land use and forestry is responsible for 20% of all greenhouse gas emissions, it also has the potential to be a trillion metric tonne carbon sink?

2. How can technology be leveraged to measure, monitor and verify the natural resources that are being preserved so governments and big companies can reward responsible producers?

3. How can we get government politicians and everyone to unite on upstream biodiversity loss in the form of the global deforestation pledge?

Finally, we heard from Richard Roberts, Head of Research at Volans. Richard shared his enthusiasm for the forum because change requires enlightened businesses to engage in politics - as Ronald Reagan once said “politics is too important to leave it to the politicians”. Richard felt that the snail's pace of the COP26 process masks the significant collective change that is happening to our society. Another quote that gets used is from one of of Ernest Hemingway's novels where a character is asked how they went bankrupt, and the answer is “First, gradually, then suddenly”, which applies to the current environmental agenda which has been gradual for such a long time, but is now shifting into a phase of sudden capital, policy, and technology convergence to address the issue. Richard also shared some of his ‘Tomorrows Capitalism’ research that has shown that we have been running an economy that is in ecological deficit for a very long time, and the consequences of that are now becoming apparent. We are going to be paying off that ecological debt for a long time, but that creates a big opportunity for regenerative agribusiness and any business that is helping to restore nature and biodiversity.

A number of ideas were shared during the ongoing discussion, including the following:

• There is a significant political appetite for the government to raise its ambitions in environmental policy, particularly from younger MPs and Red Wall MPs. 

• The carbon credits system is masking the problem that all production has a carbon cost. Globally we need to ensure the carbon credits system can be strengthened to ensure that carbon credits are invested in a more effective and measured way, such as the Saudi system where developers are making direct contributions to marine conservation which is creating a long lasting carbon sink. We need higher fidelity, better monitoring, better measuring and a more robust and honest carbon credit system.

• Local authorities need to review their procurement system to invest in new green technologies. They are held back by procurement lists which mean they can only work with certain suppliers, stopping them from using more innovative and sustainable solutions. There are also barriers created by local politics which stand in the way of council efficiency and innovation. 

• Procurement is also a challenge when companies are looking to work with farmers. For example, biochar is part of the government plan with a goal to produce 5 million tonnes of it annually by 2040. However, there are barriers for biochar organisations looking to work with farmers who often work in a traditional way and do not have a lot of spare resources to look at new business models or suppliers. DEFRA is investing in organisations which build relationships with farmers to help educate them about new innovations, so these provide an opportunity for entrepreneurs in this sector.

• Schools could educate children on the positive changes that are being made to improve the environment and how these work in different regions.

• Water is becoming an increasingly stressed resource, and one of the areas DEFRA could look at is how to incentivise farmers to put in more nature based solutions, such as chalk streams, rather than relying on water treatment works, and how to get to scale. 

• We also need to review the regulation, which does not recognise the integrated nature of natural solutions. For example, if a company takes waste water from a treatment works and puts it into a wetland, they need a waste management licence.

• Nature is very place based, and there is an argument that we need to shift to seeing more businesses which are grounded in their local communities. This creates an existential challenge for the big multinationals with complex supply chains, but there is recognition particularly in food and agricultural companies that they need to reinvest in regenerative nature. 

• Corporate measurements of sustainability are extremely varied, depending on the individual companies focus or product. For example, Nestle are interested in 1000 farms upstream in the Amazon and deforestation, British Sugar might be about sugar bean fields and soil erosion, Wessex Water might be looking at planting cover crops near a river, and Diageo might be looking at carbon emissions across their supply chain so we can buy a zero emission pint. They are engaged, but it is extremely fragmented. 

• One of the challenges for the UK is we only account for 1% of world carbon emissions, and unless we can change things on a global scale we are making a tiny contribution. To make global changes we need to look at reducing other factors such as conflict and poverty to influence the economies and priorities of other nations. 

• If you took all the degraded land in the world it would be a greater land mass than Russia.

Our next roundtable is on 12th January, where we will be exploring ‘The Value of Nought - How to align your business with Net Zero’ . If you would like to get involved in the Green Entrepreneurship Forum and contribute to this roundtable please email katrina@tenentrepreneurs.org.

Green Entrepreneurship Forum: Funding

On 21st October we hosted the second instalment in our series of roundtables for the Green Entrepreneurship Forum: a new policy initiative we are running with Mishcon de Reya that brings together the UK’s most successful sustainability driven entrepreneurs to help support their growth and inform us on the policies they need to flourish.

Great ideas should not cost the earth. Many traditional funding routes focus on the monetary value, which can make it challenging for sustainability-focused businesses to raise the funds needed to grow. However, there are ways to raise the necessary capital. At this online roundtable we discussed how sustainable businesses and businesses working for social good can scale through debt and equity fundraising. We also considered whether any additional government support should be offered to the UK’s sustainability driven startups. 

To open the discussion Simon Daniel from Moixa shared his experiences and learnings from raising capital over the last 15 years. He shared a fantastic analogy using an hourglass - the early stages of fundraising can be quite easy - it becomes much harder as companies try to raise Stage A and B funding because of the high risk, and then becomes much easier once the company seed Stage C and D funding or reaches an international level. He shared an experience where he went to find investment for a new technology invention and was told by the  CEO of a large computer company that he would rather buy it for $50m once it had been proven than buy it for $1 mil when it had no traction. He also highlighted the importance of timing - his company developed a smart battery and tried to raise funding, but it was only after Tesla had proven the importance of the technology. He finished off by explaining the importance of carefully managing share options, as getting this right in the early stages can influence the ability to raise more money later on. 

Next we heard some thoughts from the investment side of the table from Vish Srivastava, Managing Partner of Future Business Partnership, a new investment fund with the overarching goal to use traditional investment discipline can be used to make the world a better place. He shared that his investors are looking for businesses that have proven their profitability model and scalability, with the infrastructure and experience to scale a business. Investors who are committed to investing in companies with environmental and social advantages want to see solid KPIs, measurements and targets around their impact. They want to see the same level of commitment to the social benefits as well as the business growth. 

We then asked Mischon de Reya to provide a few words of advice from their legal experience. Alison Keyse and Emma Miller from the Private Equity department spoke about the importance of getting the right investors involved who can bring money but also sector expertise and strategic thinking, and being careful not to have too many investors with different priorities. For green entrepreneurs it is important to allow for longer lead times into businesses becoming revenue generating, as well as choosing the right partners who are prepared to help on that journey. There is also an opportunity for policy to increase support for green entrepreneurship through changes to schemes such as SEIS and EIS , for example investors could be rewarded for holding onto their investments for longer. Sarah Spurling from the Finance department focuses on domestic and cross-border debt financings.  She shared the importance of collecting KPI’s and sustainable evidence about the impact of the business to help not only secure the right lenders but also satisfy the regulatory requirements. 

A number of ideas were shared during the ongoing discussion, including the following:

• If the Treasury were to increase the current threshold for international investment from €8m to €20m during the current Prospectus Regime review, it would unlock additional international investments. The current threshold is stopping businesses from gaining the support because many platforms are looking to work with sums between 8 - 20 million. The Prospectus Regime review may open a number of other opportunities.

• Getting good evidence of sustainability is a huge challenge when businesses are part of a supply chain, so making sure you are clear on your own performance and work with organisations with equally rigorous reporting will help in securing funding.

• The short term nature of private equity and treating companies as commodities is fundamentally incompatible with long term purpose driven businesses. One way to address this is moving to a stewarding structure which separates out control and economics. This is more prevalent in North West Europe and is emerging in the UK.

• Some investment funds are moving in the direction of providing financial incentives to investors by linking their profits to successfully achieving the social benefit promised to long term investors. 

• Certain industries, particularly within the industrial sector, do not currently qualify for EIS support. If the scheme was revised to prioritise decarbonisation it would allow more heavy industry companies to focus on this goal. 

• Private debt financing can often come with crippling terms - a return of 18% per annum is not viable to company growth. Even in an asset holding company there is still a requirement for some level of director liability. There are very few people who can absorb this level of risk. One idea raised was that the government could provide the guarantee rather than the individual to make debt access more favourable.

• The Loan Market Association is currently developing a structure for Green Loan Principles and sustainability linked loans where there are benefits linked to evidencing sustainability, but this is mainly for larger scale businesses. 

• While putting figures on impact reporting can be challenging, it can be easier to tell stories and provide case studies. In some instances this can be enough evidence, particularly with crowdfunding rather than going through traditional funding routes. This also allows the company to keep its managerial control. 

• The US and Europe are easier places to raise money for green technologies. For scalable businesses it is a good idea to think internationally from the beginning.  

Our next roundtable is on 18th November, where we will be exploring ‘ Ecosystem Economics - how natural resources are the future of capitalism’ . If you would like to get involved in the Green Entrepreneurship Forum and contribute to this roundtable please email katrina@tenentrepreneurs.org.

Green Entrepreneurship Forum: Launch Event

In October, we hosted the launch event for the Green Entrepreneurship Forum: a new policy initiative we are running with Mishcon de Reya that brings together the UK’s most successful sustainability driven entrepreneurs to help support their growth and inform us on the policies they need to flourish.

We were joined by Danny Kruger, MP for Devizes, who shared a few opening thoughts about the opportunities presented by COP26 to position the UK as a global leader of businesses driven by social purpose. He championed the many large and small businesses in the UK which are making a significant contribution to sustainability.

The discussion covered a lot of ground, spanning a number of topics, including: 

• The challenges entrepreneurs face when trying to access grant funding and international investment, and the disconnect between the national recognition of the need for innovation versus the support offered to those who are creating new businesses.

• The importance of looking at the global picture. With 70% of emissions coming from households, can the UK do more to encourage UK and global citizens to do more personally to reduce their footprint, and can we alter our export finance rules so sustainable solutions can be taken to emerging markets where credit worthiness is poor but carbon emissions are high?

• The need for clarification of terms such as ‘Net Zero’ – for example the Science Based Target Initiative has clarified it is not going to include offsetting.

• Rather than increasing tax, the government could rebalance taxation in favour of sustainable solutions, for example by reducing tax on electricity but increasing it on gas. 

• The need to focus not only on carbon emission, but increase awareness about the other pressing environmental issues.

• The challenges of waste and emissions in the food production industry, and the opportunities created by new technologies which create food without the land or waste of traditional farming methods.

• Our funding and policies to match the EU investments in green energy. 

• The challenges of gaining procurement from larger businesses and choosing suppliers with sustainable credentials, but also the opportunity presented by aligning your product with the sustainable goals of potential clients, particularly those going through the B-Corp framework. 

• The lack of transparency around the 2050 targets and goals and dates makes it hard for innovations to prepare and develop their products.

• The need to invest in specialist STEM teachers to ensure we have the talent for green businesses in the future.

Key Points raised:

Jim Laird, CEO of Enough raised the point that, given that 15% of carbon emissions are from animal farming, does the government see a genuine path to net zero, or is it a political soundbite?

Danny Kruger MP recognised the huge opportunity of the development of new sustainable proteins, but said we need to find a balance in the laws around agriculture. Quality farming can be a positive for carbon reduction due to the grasslands creating a carbon sink, but battery farming is a contributor to the problem so we do need to insist on quality farming. 

Andy Chen, Founder and CEO of Graphene Composites shared his experience over the past 6 years of his company has applying to various Innovate UK and Export Support programmes, and without exception they’ve commended the ideas but suggested a larger, more established company would be better placed to take the idea and turn it into reality. He asked if there is a will in government to sponsor that key stage of growing entrepreneurs from seed rather than encouraging them to hand them over?

Danny Kruger MP said he was very conscious of the problem, the UK is very good at innovation but less good at holding on to them. His view was the UK needs a more patient long-term sense of what value looks like, and not have a system that seeks a quick return. He knows the Chancellor is conscious of it and it’s part of the strategy to keep innovation in this country.

Bruce Davies, Co-Founder and joint Managing Director of Abundance Investment shared his experience of how his company backs businesses as they go into scale-up mode, and has seen how regulation is a big barrier for green businesses, even though there are some positive movements on the capital market side. He thinks if we can simplify the way we look at capital raising through a review of the prospectus directive to say, 20 to 30 million euros rather than eight million euros, this would be game changing and would open up a whole market of finance which is currently stagnating.

Tom Parkinson, Managing Director of SteamaCo raised concerns that all the efforts made by UK businesses and individuals to reduce our environmental impact will be swamped if developing countries with growing populations continue to burn fossil fuels, and the importance of taking a global view on changing behaviours. 

Jo Hand, Co-Founder of Giki Zero echoed the importance of global behaviour change, identifying that 70% of carbon emissions can be attributed to household emissions, and unless consumers change the way they do things across the world we are not going to reach our targets.

Will Richardson, Founder and CEO of Green Element and Compare your Footprint raised the point that definitions around green terminology are currently unclear. He also stressed the need for the government to offer a clear strategy on what constitutes Net Zero. 

Nick Gibbins,  Co-Founder and Director of New Resource Partners, shared his observation that there is considerable support for green businesses out there, but it takes persistence. BEIS and Innovate UK can be clunky but there are some very good people involved. He suggested the government could do better at supporting businesses as they transition from public funding and grant programmes through to private investment. He also identified that adjusting the tax system to prioritise green energy would make a valuable contribution.

Alex Fisher, CEO of Saturn Bioponics shared that, as a food producer he has seen the imposed waste created at the retail end of the food supply line, and reducing the waste in the food supply chain is something the government could very quickly and cost effectively do to make a huge impact on the sustainability of food production. He also observed that there is a lot of talk about carbon, but there are other significant environmental issues which are also very pressing and need to be incorporated into discourse. 

Professor Xiongwei Liu, Managing Director of Entrust Microgrid talked about the need to promote passive behaviour change in consumers. He suggested the government could help by promoting technologies which encourage small changes, such as limiting the temperature people can heat their homes and businesses, which most consumers would barely notice.

Dinesh Dharmija, serial entrepreneur, ex-MEP and currently promoting Ruserio Solar observed that the EU is providing significant funding to transition to green energy. They have put up 750 billion euros immediately for the 27 countries, and have committed a further trillion euros over the next 20 years, mainly to close down fossil fuel plants across Europe. He raised the question of how much finance the UK government has committed to green energy, and what the strategy is for spending it, recognising the UK would have different priorities and opportunities – for example, in wind energy rather than solar energy.

Andy Aitken, CEO and Co-Founder of Honest Mobile, shared the challenges his business had in gaining corporate clients as a relatively small and new supplier. He raised the point that this must affect a number of green businesses who are just starting out and sparked a wider conversation about how to persuade corporations to employ more innovative businesses as part of their sustainability drives. 

Simon Daniel, Founder and CEO of Moixa, shared his experiences in choosing strategic investors who then become clients as they have an incentive to use your technology. This also enables suppliers to act as change leaders from the inside. He raised the challenge faced by innovators in future planning, and suggested that the government should provide a long-term roadmap setting out dates and goals to hit the 2050 Net Zero target so companies can adapt their products to future needs.

Jarmila Yu, Founder of YUnique Marketing. observed that while there has been an increase of interest in STEM, there are not enough teachers of these subjects. This is a problem for green businesses looking to attract talent as they scale, and more should be done to train more STEM teachers or encourage retired teachers to return to work.

Sofia Belcadi, Founder and CEO of 1001 Remedies, discussed how from her company's creation they set out to only work with truly sustainable suppliers, but the lack of quantifiable metrics made it challenging to choose the right companies to work with, particularly regarding logistics. She also raised the current pressing challenge in choosing sustainable logistic companies as the costs have soared during the pandemic, so companies are being forced to forgo sustainability to fulfil their orders. 

Tom Bourne, Founder of Greenheart Consulting championed the B-Corp framework, and shared that part of their system encourages companies to create policies on engaging with sustainable suppliers, choosing new suppliers and engaging with existing suppliers on impact data. This could provide an opportunity for new suppliers who are already aligned with the corporation's impact goals. 

Alexander Rhodes, Partner and Head of Purpose at Mishcon de Reyadiscussed how the law firm has helped over 100 companies go through the legal changes required to qualify and recently achieved B Corp Certification itself. He shared how valuable the B Corp framework is in making organisations look at aspects of the business which wouldn’t have been looked at otherwise.