- Launch dedicated funds to support £10-25m climate tech transactions.
- Improve cohesion among public finance institutions to maximize impact.
- Bridge the funding gap for growth-stage climate tech companies.
Unlocking Public Financing for Climate Tech
Barclays has unveiled four critical recommendations for the new UK Government to boost financing and scale next-generation climate tech companies, which are essential for achieving net-zero goals.
- Dedicated Climate Tech Fund:
- The UK Infrastructure Bank (UKIB) or British Business Bank (BBB) should initiate a fund targeting £10-25m climate tech transactions.
- Focus on providing debt and equity investments to bridge the current funding gap.
- Maximize Public Finance Mechanisms:
- Enhance the guarantee powers of UKIB and BBB to mobilize private capital.
- BBB to explore a guarantee scheme specifically for climate tech firms.
- Ensure both institutions have the necessary expertise to understand the unique needs of climate tech companies.
- Improve Institutional Collaboration:
- Leverage the National Wealth Fund to foster better collaboration among UKIB, BBB, UK Export Finance, and Innovate UK.
- Align efforts to unlock greater financing opportunities and cohesive program delivery.
- Review Public Finance Infrastructure:
- Assess the current public finance ecosystem to identify benefits and practicalities of consolidation.
- Optimize the structure to ensure effective support for climate tech innovation.
The ‘Missing Middle’ Funding Challenge
Barclays’ report, “Scaling growth-stage climate tech companies,” highlights the critical funding gap for growth-stage climate tech firms, particularly those at the Series B+ stage. These companies face high upfront costs and extended timeframes to profitability, making it challenging to attract investment in a market more familiar with software start-ups.
Daniel Hanna, Global Head of Sustainable Finance at Barclays, emphasizes:
“The UK is renowned for its innovation, but there’s a missing middle of capital holding back the successful scaling of viable real economy ideas that support the transition to net zero. The National Wealth Fund presents an opportunity to fine-tune the UK’s public finance approach and mobilize greater private capital.“
Climate Tech’s Crucial Role
Climate tech companies are vital in mitigating climate change by reducing greenhouse gas emissions and enhancing resilience to its impacts. The International Energy Agency (IEA) estimates that 35% of the emission reductions needed by 2050 will come from technologies not yet commercially available.
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Facing Global Competition
While the UK is a leading innovation hub, it competes with robust policy landscapes in other countries, particularly the US. The UK’s response to international incentive schemes will be crucial in attracting and retaining climate tech companies.
By implementing Barclays’ recommendations, the UK can position itself as a global leader in climate tech, bridging the ‘missing middle’ funding gap and unlocking the potential of innovative solutions crucial for a sustainable future.