UK’s Mission Zero creates opportunities for climate tech innovators
by Kieran Mahanty
Five takeaways for investors that support innovation and growth
“Climate commitments and net zero targets remain just words on a page without a clear, consistent, and stable transition plan.” – Mission Zero
In 2022, the UK commissioned an independent review to determine how the country could meet its legal commitment to achieve net zero by 2050 in a way that delivers comprehensive economic and social benefits. The result was the publication of Mission Zero, a plan that lays out the economic opportunities of the energy transition and provides recommendations on how to meet the target. The review was authored by MP Chris Skidmore, who was energy minister when the UK enshrined its net zero target into law in 2019.
At Teachers’ Venture Growth, consistent with Ontario Teachers’ long-term approach to investing to support our delivery of lifetime retirement income over many decades, we are using our capital to scale disruptive technologies and accelerate positive change. Like other investors, we see a stable macroeconomic environment and clear regulatory landscape as critical. Because of this, Mission Zero is an important signal and a positive step in supporting the energy transition. Below, we look at five takeaways from Mission Zero that will support innovation and growth in the climate tech space.
1. Regulating Carbon Credits
Protecting natural ecosystems and directing capital flows to areas of immediate impact is one of the most important ways the world can reduce emissions, but there is a lack of transparency and poor data quality. Skidmore’s recommendations, in particular the establishment of a regulatory framework to ensure the quality of carbon credits, represent a positive shift and should give comfort to companies working to enable high-quality offset markets, as well as those, such as our portfolio company GreenCollar, which reward good stewardship of land and environmental resources and accelerate carbon farming via carbon credits.
2. Scaling Greenhouse Gas Removals (GGRs)
Mission Zero notes that greenhouse gas removals are vital to the delivery of net zero. It says the UK needs to accelerate development of the GGR industry if it is to capture the 40 to 100 MtCO2 per year of residual emissions expected to remain in 2050. We are tracking a growing number of European businesses finding innovative ways of removing carbon directly from the atmosphere. Such programs are generally capex-heavy infrastructure builds, and thus require high confidence in offtake volume and pricing. Skidmore’s review affirms that long-term commitment, and is therefore an important signal to these innovators.
3. Enhancing Emissions Reporting
Mission Zero calls for enhanced emissions reporting across public and private sectors, which will be essential for translating lofty reduction targets into concrete actions. The UK’s Office for National Statistics will be tasked with helping businesses to find ways to reliably track emissions through their supply chains. Enhanced reporting requirements will target greenwashing, while voluntary reporting will be transitioned into mandatory standards on a par with financial reporting. These changes support the growing ecosystem of companies helping large enterprises and SMEs monitor, track and act on their emissions.
4. Innovating in Mobility
Europe’s decarbonization path for transport is one of the most well progressed, with wide-ranging incentives for EV adoption and a fast-approaching ban on combustion engine passenger vehicles (by 2025 in Norway, by 2030 in UK and across the EU by 2035). Mission Zero is right to call attention to unsolved decarbonization challenges in the commercial transport space and aligns with our thesis that Europe can lead the second wave of innovation in this sector. The European ecosystem is thriving, with companies working in areas including the electrification of heavy logistics and zero-emission flights.
5. Investing in a Circular Economy
Skidmore’s review calls for increased investment in the circular economy, noting such efforts would reduce emissions and create jobs. It recommends that the UK ratchet up minimum recycled content requirements and seek to eliminate plastic waste. This will require significant improvement in recycling technologies and the emergence of novel materials to fill the gap. In our view, the direction of travel for regulation is clear and reinforced by a strong consumer pull: making Europe an attractive market in which to scale sustainable recycling technologies.
Mission Zero does not solve the UK’s, let alone the world’s, carbon problem but has moved the discussion one step further. As an investor, we are excited to see the UK prioritize climate and energy policy and as we position ourselves to effectively respond to climate related risks and opportunities are eager to find, back and support the entrepreneurs that have chosen to solve our generation’s most important challenge.
Kieran Mahanty is a Director at Teachers' Venture Growth (TVG), based in London, where he invests in disruptive tech across all sectors of the economy, with a particular interest in sustainability, synthetic biology and the agri-food system. Kieran has previously worked at Blue Horizon, Temasek and PwC in roles across Europe, Middle East and Asia. He holds a first class BA degree in Philosophy, Politics and Economics and a M.Phil in International Relations from the University of Oxford.