"The world won’t achieve net zero without innovation"
Barclays’ Sustainable Impact Capital Programme is investing £175m over five years in environmentally focused early-stage companies. Barclays’ Steven Poulter explains how the bank’s Principal Investments team is supporting green-minded entrepreneurs to make the most of everything the global bank can offer, as part of accelerating the world’s transition to net zero.
When it comes to climate change, Barclays’ Steven Poulter is very clear on the challenge ahead. “We need a monumental effort now, across all sectors of the economy, to have a chance of making a meaningful, long-term impact,” he says.
A major part of that ‘monumental effort’ will, he says, come from early-stage companies with innovative ideas about how to achieve net zero targets, from agritech and alternative food production to renewable energy optimisation and green building materials and practices.
As Head of Principal Structuring and Investments, Poulter leads the division of Barclays that makes strategic investments and helps the entrepreneurial companies in its diversified portfolio to grow.
Innovation is key to tackling climate change, and early-stage companies are key to delivering innovation. Supporting these companies with the right type of equity capital, at the right time, will help unlock the potential needed to succeed.
The team has a track record of investing equity capital in growth stage companies in the fintech sector. Now, as part of the bank’s net zero ambition, he says a key priority is to “accelerate technological advancement”, bringing in new products “to give Barclays, its clients and communities sustainable alternatives”.
This is the aim of the £175m Sustainable Impact Capital Programme, earmarked for early-stage green companies. Poulter’s professional investors are aiming to take 10% to 20% stakes in up to 10 companies each year, with a “sweet spot” of £5m to £15m per investment.
His hope is that by investing in this way, the bank is not only unlocking the potential of early-stage companies but also supporting technological innovation – and ultimately boosting the availability of green products and technology in the market. “And that’s what will help the wider economy with its vital transition to net zero,” he says.
“Innovation is key to tackling climate change, and early-stage companies are key to delivering innovation. Supporting these companies with the right type of equity capital, at the right time, will help unlock the potential needed to succeed.”
But the bank’s involvement doesn’t end there: Barclays also takes board representation to help the companies and support effective governance. “Part of our mandate is to find companies who we think our clients should be working with,” Poulter explains. “So we invest in them, help them scale up, bring them on the Barclays journey and into our networks.”
One such startup is AirEx, which has designed and manufactured what it calls smart airbrick technology, which can help people reduce their energy bills. “We have a lot of clients in social housing and local authorities who have hundreds of thousands of houses,” explains Poulter.
“A product like this can be hugely beneficial to their transition to net zero. Hopefully we can make connections and give our portfolio companies a leg up, but also bring enabling technology so our wider banking clients get a hand in their journey to net zero transition.”
Supporting these companies with the right type of equity capital, at the right time, will help unlock the potential needed to succeed.
Barclays’ entrepreneurial ecosystem
The market for these groundbreaking companies – the potential unicorns of the green revolution – is understandably competitive. Poulter says that when meeting entrepreneurs, he often feels “they are interviewing me as much as I’m interviewing them”.
He continues: “These are competitive funding rounds, and startups often want more than money. They also need to see the ethos. People who have spent the last five years developing an environmentally focused solution want to make sure that we're aligned on that journey.”
Access to Barclays’ expertise and the bank’s wider ecosystem is also of great value to early-stage companies. “Portfolio companies definitely see leveraging our ecosystem as an advantage and I also think they see the benefit of building a special banking relationship,” says Poulter.
With Wealth Management, High Growth and Entrepreneurs and Investment Banking services on call, ambitious founders “quite like the idea of having an investment bank that's going to be able to navigate through the £200m raise and the £500m raise. They also know the credibility that comes with working with a company like Barclays, which helps get publicity and funding.”
At the same time, he thinks the programme is filling a vital gap in the market. “Innovation tends to come more readily from agile early-stage companies,” Poulter says, “but there's been evidence in the UK over the years that there's a funding gap between these really small companies, and getting into venture capital and private equity money. If we can support that transition from an early stage by putting capital in the right way – patiently, not crowding out the founder – I think that's when we will bring innovative products to the market that will help in the transition to net zero.”
Since launch, the programme has also cut smaller cheques to invest in very early stage companies with interesting ideas, coming out of universities or accelerators. “We would look to follow up with a larger investment in one or two years’ time. We feel it is important to help nurture and commercialise these very early technologies,” Poulter says.
Principal Investments’ time horizons also differ from shorter-term traditional venture capital or private equity, as the programme is not bound by an arbitrary fund term – and as such can continue supporting companies through subsequent funding rounds when relevant.
And, while the programme is focused on creating long-term commercial success, Poulter says: “We will invest in companies whose values align with Barclays, and where there is the opportunity for strategic collaboration and a positive impact on our clients and communities.”
Barclays’ net zero ambition
Barclays has set an ambition to be a net zero bank by 2050 – across emissions from its own operations and those of the clients it finances.
The bank has committed to aligning all its financing, across all sectors, with the goals of the Paris Agreement. This will cover both lending and capital markets.
Barclays also aims to accelerate the transition to a low-carbon economy, with £100bn of green financing by 2030 and a £175m investment in green innovation through the Sustainable Impact Capital Programme.
Find out more about Barclays’ ambition to be a net zero bank by 2050.