14/01/2010

Nick Ross from Acuity Capital gives his views on environmental investing and much more

About Acuity Capital

Formed through a buyout from Electra Partners in 2008, Acuity Capital is a VC specialist targeting specific unquoted investment, identifying under-valued opportunities to which Acuity can add value.

On Environmental Investing

The Environmental Fund was launched to target the waste-to-energy sector which Acuity identified as an opportunity with good long-term investment prospects.

Government legislation restricting landfill has created an opportunity for the treatment of organic waste through the use of anaerobic digesters in which the Fund invests.

Long used in Germany, anaerobic digesters are becoming big in the UK although unlike the original German model — farm waste or crops for local energy production - we are looking at bigger systems using food waste which can no longer go to landfill and would otherwise be difficult to dispose of. The previous government set out targets to reduce landfill for this kind of waste; the current government has a target of zero landfill which is a major change in this area.

On Environmental considerations for investors and entrepreneurs

Environmental investment is a trend which is gaining momentum because of the cost implications. Government policy is all about incentives to recycle, save energy and so on. This will also impact on existing businesses which will have to find ways to reduce their waste and carbon footprint, so there is plenty of scope for new technology to find a market.

On Areas to Watch

The market is driven to where government is allocating subsidies and the renewable sector is growing all the time. Longer term, there is still quite a way to go with wave and wind power, for which the funding needs are immense. Generally, consumer behaviour, waste, insulation, energy efficiency and solar power are all hot topics and consumer decisions will have an impact.

On Current Investment Trends

Within the Acuity Fund there are a number of opportunities to fund anaerobic plants. Local Authorities are going out to tender for food waste digesters; it’s a fundamental change which will affect every area in the UK. Feed-in tariffs for energy generation have created a significant step-up in interest.

On the impact of the economic climate

There is a massive shortage of capital which has been the main impact. The environmental sector is quite fragmented and many small technology companies are having difficulty in raising funds from banks for example. A lot depends on the technology in question; anaerobic requirements were in the government’s manifesto but other sectors remain on the fringes at present. There are plenty of ideas, for example in better uses for waste, but they are unproven and it will be a while before they come fully into the market.

On how the government can encourage investment

The government has created an impetus for change. Greater focus still will lead to further momentum and that is key to this opportunity. The government must continue to focus on building momentum and keeping it going so that the advantages gained so far do not slip away.

On the willingness of investors to invest

The mood has changed significantly in the last few years and most now realise that environmental issues start at home. The choices made by consumers, the changes they are making in their habits, reflect the impact that environmental issues are having at a local as well as a national level. It is an issue which affects everyone in every part of society and so these technologies are driven by the market, by consumers, right now and that change in attitude is growing all the time.

Contact Nick Ross on 020 7306 3985 Email: nross@acuitycapital.co.uk

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