Ahead of the close of the 4th round of Green Angel Syndicate’s EIS Climate Change Fund on the 22nd September, three of our board members: President and Founder Nick Lyth, Chief Investment Officer Antoine Pradayrol and Investor Director Caroline Halliday shared some insights on what the fund aims to achieve, the impact it makes and its origins and growth story.
The meaning and purpose
What is the EIS Climate Change Fund and how does it relate to/differ from investments made in the Syndicate itself?
The Climate Change Fund is a co-investment fund investing in the deals completed by the Syndicate, and leveraging the group’s due diligence, the excellence of which has been recognised by the 2019 Angel Syndicate of the Year award from the UK Business Angels Association. You can spread your investment across future Green Angel Syndicate investments, diversifying your portfolio, and helping to increase the impact of everything we do in the fight against climate change. Following the success of Round 3, Round 4 opened on 1st July, so the fund is currently open for investment, this round is set to be the biggest yet, apply now to help drive climate action.
The fund is designed with a particular type of investor in mind, one who wants their money to be invested on behalf of them across a range of companies as opposed to choosing specific individual investments. Antoine describes the type of investor the fund aims to serve: “The fund is for high net-worth individuals and sophisticated investors, interested in illiquid investments in early stage companies, that can make very good returns but are also risky, that are ready to lock their money into companies that are going to grow over the next 5, 7 or 10 years and get returns in the long term and at the same time have an impact in fighting climate change.” Antoine goes on to discuss why a main reason for setting up the fund was to fill a need the investors in their market had: “We knew that there were a number of our members who didn’t have the time or inclination to choose the investments themselves. As angels you need to spend the time and think of which investments you want to pick individually. If you invest in the Climate Change Fund you get automatic access to all of the deals the syndicate completes. Our members told us they wanted this automatic investment capability.”
“If you invest in the Climate Change Fund you get automatic access to all of the deals the syndicate completes”
Following the successful establishment of the syndicate, the board wanted to move into fund management to diversify and expand the impact GAS investments were making. Nick discussed the origins of the Climate Change Fund and why GAS felt it was the right time to set it up in November 2020. “As GAS became more successful we were able to expand our ambitions which right from the start were to use the syndicate as a foundation for growing our impact in the fight against climate change and making more interventions across a wider span of companies. We always intended to use the establishment of the syndicate as a means to get into fund management…the long term ambition is to get into bigger fund management and the vision is to curate the development of companies in the fight against climate change from the very early stages to the point where they are successful.”
“the vision is to curate the development of companies in the fight against climate change from the very early stages to the point where they are successful.”
At its core, any investment fund’s purpose is to raise the largest sum of money possible to be injected into the relevant companies. However, Green Angel Syndicate’s fund management purpose takes this one step further and measures the environmental impact companies have had as a result of the investments made. Caroline explained the meaningful impact measured by GAS: “Every six months we report our carbon impact associated with the portfolio. We encourage all of our portfolio members to consider their true carbon impact. It’s not just tokenism or a label like an ESG label, we put bottom line numbers on the types of companies we invest in and the nature of the work they are carrying out.”
“It’s not just tokenism or a label like an ESG label, we put bottom line numbers on the types of companies we invest in…”
But what scale of impact and returns can investors expect to make? With any Enterprise Investment Scheme, there is a certain level of risk which comes with the territory of investing in startup companies. Many of the investments the fund makes are in companies which have not yet begun trading. Nick speaks on the risks investors should be willing to take: “The EIS climate change fund is by definition primarily designed for people who can take advantage of EIS tax relief, they are private individuals and UK taxpayers… We are talking about angel investors who are investing in their spare time with spare money they can afford to lose, this is high-risk investment, we are talking about startup and early stage companies which are not necessarily trading yet and if they are trading they have not yet reached breakeven”.
In the short-term investors are unlikely to make huge returns but in the longer term the carbon impact they can make is significant. Antoine discusses the unique investment potential the fund holds: “We invest in companies at the very beginning when there is very little impact, but the beauty of the model is because we invest at a very early stage we enable these projects to take off. We know the big impact in terms of carbon emissions will happen in the long term but we are here at the very beginning to allow these projects to take off. If there was not the money the fund puts on the table, maybe these companies would never reach the commercial stage and have an impact.” Despite most of the climate impact taking place within the timeline of 10 years, many of the GAS deals have already had a great effect on the environment due to their pioneering innovations – “There are already a number of companies which have started to have an impact, we have calculated that as of the end of 2021, all of the GAS portfolio companies collectively had enabled 57,000 tons of carbon to be avoided and not emitted to the atmosphere.” – Antoine.
Growth and potential
Looking forward, the fund is growing from strength to strength and now on its fourth round of investment. We asked the board members to reflect on the growth and development of the fund since its inception in November 2020. “The Climate Change Fund has been really successful in a way which is even better than we hoped…we were exceeding our targets significantly in each round, it has really been satisfactory in its performance…we hope to do even better than round 3.” – Nick Lyth.
The Climate Change Fund has been really successful in a way which is even better than we hoped…we were exceeding our targets significantly in each round
The fund is also evolving in terms of the types of investors it attracts, moving from an internal GAS member initiative to including a majority of outside investors. Antoine explains this change: “At the beginning it was very much focussed on existing members, since then we have expanded the reach of the fund and attracted other investors…In the 3rd round we closed a few months ago the majority of investors were people who are not members and this is the largest in terms of fundraising we have ever done”.
In terms of the wider green investment space, investors should not feel they are narrowed down by investing in the green sector specifically. Caroline discussed the broad nature of the green space and its growth potential: “It’s very diverse, green space sounds like it would narrow it down but actually it doesn’t. The space is so wide and more and more companies are looking at it as an interesting space to work in with a large international growth potential. We find our pipeline is particularly strong and is getting stronger, we have at least 2 (portfolio) applications every day and not just in number but the quality of applications is improving all the time. It’s a focus sector but it’s also very broad in its nature and there are lots of growth opportunities.”
The space is so wide and more and more companies are looking at it as an interesting space to work in
Watch the full video below of GAS Investment Officer Antoine Pradayrol answering some key questions on The Climate Change Fund, Round 4.
Round 4 is open for Investment to High Net-Worth Individuals and Professional Investors. The round will officially close on the 22nd of September, to find out more visit the fund website or to register, fill out our investor form.
Investment in early-stage companies involves risk such as illiquidity, lack of dividends, loss of investment and dilution. Even when diversified within a fund, investing in early stage companies carries a higher risk than investing in more established companies. Investment in EIS and SEIS funds should be considered as part of a diversified portfolio.