Investing Insights: Sustainability

Investing Insights: Sustainability

19th April 2021 by Michaela Salomon

When investing, your capital is at risk. 

Sustainability has become one of the hottest buzzwords in the business world, with more Google hits than ‘the Grand Canyon’, or ‘Ghandi’. But what does it actually mean? 

In essence, sustainable businesses aim to deliver on growth and meet the needs of today’s consumer without compromising on the health or wealth of tomorrow – and they’re growing in popularity. According to Deloitte research, over 43% consumers choose brands based on their environmental values. As a result, sustainable businesses from clean energy solutions, to circular economic models, to carbon offsetting technologies, are securing more institutional money than ever before, with the impact investment space anticipated to grow to over $400 billion by 2028. 

Keep reading to find out how you can share in the growth of the sustainability space. 

➤ Combining profit & purpose

Hundreds of companies including Apple and Ikea have committed to net-zero emissions targets before 2030, and the UK is currently leading Europe with the highest number of net zero companies in operation. Amidst growing greenwashing concerns, firms are being held increasingly accountable by consumers and stakeholders to their sustainability promises – and doing so has proven good for business. Companies backed by a social impact investor are more likely to secure follow-on funding and exit, whether that be through IPO or acquisition, and according to Deutsche Bank, companies with high environmental, social and corporate governance ratings outperform the market in the medium and long term in 89% of cases.

The B Corp certification has earned its title as the golden standard for sustainable business, awarded to for-profit organisations that give just as much consideration to their balance books as their socio-environmental impact. Following global certified brands like Ben & Jerry’s and Patagonia, over 3,900 organisations in 74 countries worldwide have secured accreditation. We’re proud to say that 9 of these have successfully collectively raised over £23.9M on Seedrs, including sustainable tissue brand The Cheeky Panda, impact investing platform tickr and recipe box brand Mindful Chef which just sold to Nestle.

Venture investors are also engaging with the B Corp movement – Unilever already has 5 B Corp brands in its venture portfolio). Additionally, UBS research shows that nearly 40% of family offices will invest the majority of their portfolios sustainably over the next five years, making a strong case for startups to adopt and certify sustainable business models. Overall, the B Corp movement will play an increasingly important role in helping both institutional and retail investors distinguish businesses that champion sustainability from those that simply pay lip service to it.

➤ Funding a greener future

Asset classes from public equities to index funds have initiated a strong push toward ESG initiatives, and while the VC world has been slower to adapt, industry-wide statistics look more promising every year. According to PwC, VC investment in climate tech between 2013 and 2019 grew 5 times the overall global VC market, amounting to $60 billion in early-stage capital, 11% of which was invested into European startups. Sitting in first place among the industries responsible for this growth is e-mobility, followed by greenhouse gas capture and storage, food and beverage innovation and renewable energy solutions. Micro-mobility startups alone accounted for $37.4 billion of all climate tech funding in the past seven years. 

Impact investment in the UK has tripled in volume in the last decade alone, now accounting for more than 15% of total European VC investment, and double the global average. Among 2020’s top fundraising rounds for sustainable startups is AI-driven energy startup Octopus Energy, which skyrocketed to a $2.06B valuation following its $200M investment round led by Tokyo Gas, and plant-based meat alternative Meatless Farm, which raised £24M in 2020 from new and existing investors to expand to international markets. These big-hitting rounds are indicative of a larger trend, and venture firms’ commitment to sustainable investing. 

➤ Green is the new black

As data further suggests that impact investors have a longer exit horizon than conventional funders, venture and retail investors will likely continue to focus their efforts (and wallets) on ESG opportunities. While the impact investment space was among the hardest hit by the Covid-19 crisis, Beauhurst anticipates a flurry of activity in its wake, as investors look to back solutions for economic recovery. After all, there’s nothing quite like a pandemic to signal the need for long-term solutions for social, environmental and economic resilience. 

At Seedrs, we help fund more sustainable businesses every year, from plant-based F&B innovators to e-mobility solutions to renewable energy technologies – and our investors show growing interest in them. Just a few months ago, desalination and tidal energy tech Hydro Wind Energy closed a crowdfunding campaign that was over 3 times oversubscribed, raising over £690K from more than 1200 investors. MacRebur, which is currently live on Seedrs, has raised £2.6M from 2,300 investors to repurpose waste plastics into roads at international scale. Another of our alumni, impact fund Sustainable Accelerator has not only raised nearly £4M on Seedrs over the years (garnering support from over 620 investors for its 4th fund alone), but also came in 5th among the UK’s top impact funds for financing the most sustainable deals since 2011. 

As countries around the world strive for climate targets and economic recovery, the need for sustainable solutions has never been greater. We’re looking forward to supporting the businesses equipped to face these challenges – the ones that balance profit and purpose, to build a better future for all.

Michaela Salomon

Michaela Salomon

Campaign Support Team

Digital Agency Kent