Companies large and small seek investment for numerous reasons: profile-raising and a crucial cash injection to make the leap from start-up to fully commercial enterprise; diversification to enter new markets – whether sectors or territories, as well as investment for new processes or for the equipment to scale-up, to name but a few. So, what are investors looking for in the current uncertain economic climate?
There is, of course, a plethora of reasons behind investors’ motivations but a robust business case will always be a top priority – the market potential, a company’s track record and a return on investment are all vital. The ramifications of Covid-19, its impact on the global economy and the philosophical changes it has brought about – both on individual and on institutional behaviour – have led major private equity investors to pause, rethink and reconsider their priorities. Increasingly, continued climate change and an urgent need to address carbon emissions are at the fore.
In a week where the extreme impact of a fluctuating energy market is the top story on every news channel and as the British Government prepares to host the UN Climate Change Conference, Zurich UK in conjunction with University of the West England has published its ‘Journey to Net-Zero’ report. Ultimately, it finds that UK businesses are on track to deliver only one-third of the emission reduction necessary to hit the 2050 target for net zero. This raises key questions for companies seeking investment in a world where investors put sustainability at the heart of their own strategies and who know full-well the importance of CSR. Here, we look at just a couple of these aspects and consider how companies seeking investment can demonstrate the ethos and approach that will align them with investors’ agendas.
Evidence that a company is working towards net zero is an obvious way to signal an alignment of values to a potential investor, particularly relevant at a time when ‘greenwashing’ is becoming more apparent. And an energy management strategy can form a critical, and scientifically measurable, element of such an approach. At Powerstar, we are increasingly being approached by companies looking to focus on net zero. This includes both the 2050 Government target, and those set by specific sectors, which are often sooner.
For companies of all sizes, providing electric vehicle (EV) charging points for employees and customers, as well as changing fleets to EV is one clear way to demonstrate a commitment to a reduced carbon footprint. That said, the implementation of such a policy has significant ramifications regarding on-site energy requirements and may even involve possible refusal from the company’s Distribution Network Operator (DNO). Similarly, a shift to renewable energy generated on-site (roof space for a solar installation, for example) is another option to demonstrate a clear commitment to net zero and a carbon reduction ethos to potential investors. Again, though, there are ramifications to consider. And, when looking to protect vital processes and equipment in the event of a power disruption, a move from a traditional UPS (uninterruptible power supply) unit to a BESS (battery energy storage solution) system can mean an instant reduction in emissions relating to the protection of vital systems. These aspects – all with a view to working towards a secure net zero future – are covered in greater detail in Powerstar’s other blogs, so please delve into our articles for more detailed information as to how each area – EV charging, on-site renewables and investing in a BESS – can demonstrate to potential investors that your company is focused on carbon emission reduction and is compatible with their own CSR and sustainability agendas.
Mindful of a critical aspect that potential investors will always be looking for, we have to consider the return on investment and a robust business case. The energy landscape is in flux, now more than ever. Aside from the current situation regarding gas supply, we are already in a scenario where the National Grid admits that it has an ageing infrastructure, no longer fit for purpose as we move towards ever more inflexible renewables and away from historically reliable fossil fuels.
For companies whose growth and investment potential are dependent upon implementing new processes and / or new and costly equipment, this fragility is a crucial issue, and evidence of an energy management strategy to inform any approach for investment can provide the reassurance an investor will be looking for. Already, we know that 3% of working days in the UK are lost to power disruption, which the ONS equates to £180 billion, for the UK’s manufacturing sector, alone. Future-proofing, whether at proof-of-concept stage or as a long-established company looking to diversify or expand, is critical when looking to attract investors who are, obviously, concerned about ROI.
Resilience is key for any growing venture, and power resilience is at the heart of our own R&D. Our BESS systems are helping companies across the UK maintain critical energy supplies in the event of power disruptions. Functioning as a smart microgrid – and as power supply direct from the grid becomes more unstable – our systems are helping companies maintain vital business processes and manufacturing lines while also enabling the storage of renewable energy generated on-site to be used when required. While reassuring potential investors regarding a company’s capacity and energy security to continue business, uninterrupted by power fluctuations, such a microgrid set-up can also introduce a new revenue stream via on-site generated renewable energy to be sold back to the grid: a potentially compelling add-on to any investor pitch.
One final aspect, in relation to this brief consideration of energy management and its potential to attract investors, is a note on our own R&D developments in the field of digital twinning. Investors take risks based on potential rewards, particularly when getting involved from the start-up to commercialisation stage in a company’s growth. However, in the current economic climate and with CSR and sustainability uppermost in many corporate and venture capital minds, our digital modelling services and our digital twinning can help mitigate risk, for companies at this stage and for those long-established companies investing in new ways of working or novel processes. Proven through recent case studies with commercial clients, Powerstar can now virtually simulate a project prior to installation, enabling us to ensure the new venture will work as intended and envisaged, under a variety of both internal and external influences. With the shift to Industry 4.0 and increasing digitisation, and in an unstable energy environment, our digital twinning will, we think, become an invaluable tool for customers looking to implement and refine energy management strategies.
There is clearly much more to the conversation regarding investment, sustainability, green credentials, and UK business. We hope to talk to some of you at our forthcoming events. In the meantime, to find out more about how we help companies demonstrate their work towards sustainability goals and develop their energy management and power resilience strategies, please get in touch.
28th September 2021