UK sustainable private equity fund finds post Brexit opportunities
The Nobel Sustainability Growth Fund, which makes UK sustainable private equity investments to build technology, manufacturing, services and asset development and is managed by Jim Totty and Nick Curtis, is close to its first close.
Launched in partnership with the Nobel Sustainability Trust ,which was founded by members of the Nobel Family, and Earth Capital, the global investment group founded by Gordon Power and Stephen Lansdown, co-founder of Hargreaves Lansdown, the fund invests in UK businesses that can address global markets.
Totty explains that Lansdown and Power have worked together for 20 years and are big supporters of sustainability through their Earth Capital platform. Totty and Curtis’s business is part of the Earth Capital group. “Our parent has decided to have a unified group with a similar theme in terms of names,” Curtis explains.
“The key investment theme is the sustainable revolution over the next 20 years, driving change across many industry sectors globally. Whether transport, industrials, energy or utilities; everyone is having to transform from a fossil fuel driven world.” Totty (pictured) says.
The managers look for companies that cause disruptive change in their chosen sectors. An example would be a company called SoftIron which offers data storage hardware technology which uses only 20 per cent of the power a normal server uses in a data centre.
Totty explains: “We have both a top down and bottom up approach. We look at particular industry sectors that will undergo the biggest strategic change. An example is energy storage where battery prices are coming down to a level where we will see many more lithium ion batteries being deployed. There is extensive roll out in that sector that is throwing up high quality investment opportunities.”
The firm uses its Earth Dividend measure for sustainability, which measures ESG and sustainability in the private markets, where there is not as much data as is found in the listed equities and fixed income arenas.
“There was no off the shelf measure for private markets, so we have developed our own which uses 30 tests over a number of dimensions of ESG on both prospective and current investments,” Totty explains. “During the life time of an investment we also do an annual Earth Dividend test to measure ESG progress, which enables good ESG companies to become even better during our ownership.”
He explains that in the past the social part of ESG was not always considered in private equity. In solar panel manufacture, for example, there have been stories of local populations exposed to toxic chemicals.
“Ours is a holistic ESG metric for private market investments that evaluates investments for ESG across all the main environmental, social and governance measures.” Totty says.
Entrepreneurial activity in sustainability in the UK is at record levels, they say, despite Brexit uncertainty. The Nobel Sustainability Growth Fund has reviewed over 300 deals so far this year, already beating the manager’s 2017 total with two months of the year still to go. “Levels of entrepreneurial activity in UK sustainability have never been higher” says Totty. “Sustainability is one of the UK’s world leading sectors in a post-Brexit marketplace and we expect to see even more high quality investment opportunities going forwards”.
Curtis says: “We see a crowded infrastructure space with low rates of return but growth and venture capital will be at a premium with people looking for growth, and solutions to problems.”
Totty says: “We are in conversations with UK asset owners, corporates, pension funds and family offices – a range of fund investors who all share a common theme of looking to embrace ESG. They understand the need for an actively managed strategy and what we offer is a hands-on approach – it’s very important.”
Totty says that in transport things are moving very quickly with electric vehicles now entering a rapid growth phase, and then autonomous vehicles coming soon. There will soon be services models in mobility where people won’t own vehicles in a few years’ time, he says.
“It’s a massive change from the hundred year old fossil fuelled vehicle ownership business model. Rapidly developing business models need an active management approach,” Totty says. “You want a fund management group at the cutting edge of business models and technology.”
Curtis explains that the firm is focusing this fund on growth capital which is where the equity gap is. “Companies need money to establish themselves and grow. In the environment of this Brexit world, we see lots of opportunities particularly from the entrepreneurial nature of the Brits,” he says.
“Our timing in the cycle is very good.”