The Environmental Innovation Fund, a cleantech VC vehicle formed by the UK Innovation Investment Fund and managed by Hermes Private Equity, has held a first close on £125 million in capital commitments.
The UK Innovation Investment Fund is off the ground with the first closing of the GBP125m Hermes Private Equity environmental innovation fund.
It’s taken only 7 months for UKIIF to launch the first of two funds, the Hermes Environmental Innovation Fund, which has already raised GBP125m and will continue to seek further funding from investors.
The Environmental Innovation Fund, managed by Hermes Private Equity, will now start investing in low carbon and clean technology funds and co-investing in companies, providing much needed venture capital to help these innovative businesses grow. The Hermes Fund will focus on investment opportunities aimed at increasing the efficient use of resources (both renewable and non renewable) at all stages of production and consumption.
Over the past decade, the UK has emerged as a European frontrunner in alternative energy investment and is well positioned to further develop a sustainable market competitive globally. The Hermes Fund will look to benefit from this attractive market framework and expects to commit its capital over the next 2-3 years.
The Prime Minister, Gordon Brown MP, said
‘The UK has a wealth of innovators and entrepreneurs seeking to create the businesses of tomorrow – businesses that will make the UK a world-leader in low carbon innovation and industry, and help to tackle some of the biggest challenges we face around energy and climate change. This fund will provide substantial investment where it is needed and deliver strong returns for investors.”
Science & Innovation Minister, Lord Drayson said:
‘Investment has flowed into the UKIIF at extraordinary speed. It’s already one of the largest European funds for investing in high-tech firms. But what’s more important is rapidly channelling that capital into Britain’s burgeoning green tech sector. After a tough spell, things are looking up for our entrepreneurs and innovators.’
Energy and Climate Change Minister David Kidney MP said:
‘Cleaning up our energy supplies and improving energy efficiency will give the UK the opportunity to develop the low carbon industries of the future. This new fund will help the UK to build on existing strengths in the sector and enable British companies to demonstrate and commercialise these technologies.’
Hermes Private Equity CEO Susan Flynn commented:
‘Increased awareness of environmental issues and policies to tackle climate change presents a real opportunity for investors and the innovative companies we will invest in. At this stage in the economic cycle there are many forward-looking companies who may not have funding available to them. The Hermes Private Equity Environmental Innovation Fund (HPEEIF) will ensure that those seeking finance for promising new environmental ventures will have access to a source of funding.
We have already identified a number of attractive investment opportunities and anticipate that HEIF will begin to deploy capital shortly.’
The UK Innovation Investment fund was announced last June by the Prime Minister as part of the Government’s strategy for Building Britain’s Future. Hermes Private Equity and the European Investment Fund were confirmed as fund of fund managers for two separate funds of funds. Backed by GBP150m investment by the Department for Business, Innovation and Skills, the Department of Energy and Climate Change and the Department of Health, it has already attracted private investment to more than match this amount with the total first closing of GBP325m.
The UK Innovation Investment Fund will drive economic growth and create highly skilled jobs by investing in businesses where there are significant growth opportunities. Independent research
* estimates that the global market for low carbon and environmental goods and services (LCEGS) was already worth GBP3 trillion in 2007/08 and could grow to an estimated GBP4.3 trillion by 2015.
According to figures from the Carbon Trust, the UK is now the sixth largest low carbon and environmental economy in the world with 3.5% of global market share. This brings annual economic benefits and investment to Britain of GBP6-8 billion.
The UKIIF will target small growing businesses, start ups and spin outs including pre-profit and pre-revenue stages of development.
Evidence shows that venture capital-backed companies significantly out perform other companies in terms of their ability to create wealth and generate the spill-over benefits including export performance and the creation of high skilled jobs vital to the economy.
Notes to editors
1. The UK Innovation Investment Fund was launched on June 29.
Hermes Private Equity and EIF were announced as the two fund of fund managers for the UKIIF on 9 December 2009.
2. Hermes will be launching a new fund of funds, the HPE Environmental Innovation Fund using GBP50m of UKIIF funding alongside commitments of GBP75m from private sector investors creating an initial pool for investment of GBP125 million
3. The Fund will particularly focus on pooled investment funds that invest in United Kingdom opportunities. It will provide investors with the opportunity to invest in both funds and co-investments in businesses with high growth potential, primarily focusing on the environmental sector.
4. Negotiations and financial allocations were made by Capital for Enterprise Limited (CfEL) a professional asset management business owned by the Department for Business, Innovation and Skills (‘BIS’). The business is managed by an independent Board of Directors, drawn from across industry and finance, and has 15 full-time expert staff as well retaining specialist consultants and other professionals as required.
5. Hermes Private Equity is a wholly owned subsidiary of Hermes Fund Managers Limited and has been operating private equity fund of funds since 2000. It has over GBP2bn under management, as at 30 September 2009. The team has extensive experience of investing in alternative investments and over the past 10 years HPE has committed to over 100 funds in the UK, Continental Europe, USA and Asia, investing in early stage venture through to large buyouts and infrastructure.
6. * Source – Innovas 2009.
7. ** Source – British Venture Capital Association DATA 2008 – the economic impact of private equity and VC in the UK.
Department for Business, Innovation & Skills
The Department for Business, Innovation and Skills (BIS) is building a dynamic and competitive UK economy by: creating the conditions for business success; promoting innovation, enterprise and science; and giving everyone the skills and opportunities to succeed. To achieve this it will foster world-class universities and promote an open global economy. BIS – Investing in our future.