UK green bank pioneer Kingsbury: new $1.5bn fund to bridge energy's 'valley of death'

The founding head of Britain’s Green Investment Bank (GIB) claimed the $1.5bn climate-focused fund he now helps lead can have the same impact in the toughest-to-decarbonise areas of the energy transition as the pioneering UK body had in offshore wind a decade ago.

Shaun Kingsbury, chief investment officer of Just Climate, said sectors such as steel production, heavy transportation and heating face similar challenges to wind at sea in its early days in Europe, when the UK GIB was set up to help bolster confidence with targeted backing for projects.

“We [Just Climate] want to do it with private capital, we want to take down those costs,” said Kingsbury.

Just Climate amassed its fund thanks to what Kingsbury claimed as one of the most diverse array of backers seen so far in energy transition finance, ranging from early supporters such as Microsoft and Goldman Sachs to pension funds, corporates, insurance groups, family offices and sovereign wealth funds.

The fund – first announced by parent Generation Investment Management before COP26 in 2021 – successfully convinced investors to help address what Kingsbury described as an energy transition finance “valley of death”.

“There’s a group… where maybe 50% of global emissions come from. but receiving maybe 10% of the capital flows.”

These are typically “asset-heavy businesses” requiring significant investment to achieve their green aims. “You can’t decarbonise steel production just with a software solution. You may have to build a whole new steel plant,” said Kingsbury.

“The cheque sizes are typically too big for venture capital, for most growth capital too asset-heavy, and yet for infrastructure too early. They fall between the typical allocation buckets and into the valley of death.

“We’ve been able to show the opportunity and the need [for investment],” added the finance executive.

Trio of early investments

Just Climate has already made three initial investments – EV charging specialist ABB E-mobility, steel decarbonisation pioneer H2 Green Steel and Meva Energy, which is developing renewable gasification for manufacturing industries.

Kingsbury said sectors on its radar include green hydrogen, sustainable fuels, and sustainable aviation, as well as LDES, which he reckons could play a particularly key role in the energy transition.

It won’t, however, typically be looking at ‘standard’ utility-scale wind and solar, which already has a wealth of finance options elsewhere.

“We’re looking to do the hard things – the things where capital isn’t yet flowing,” said Kingsbury.

Sentiment softening to fossil fuels?

So, buoyed by backing for the fund, what does the Just Climate CIO make of reports that some investment sentiment is turning sourer on climate and emissions-reduction and looking back to the lure of oil and gas returns?

“I've seen those reports too,” said Kingsbury. “I can only point to the depth of the engagement we’ve had [with huge investors] who are looking to the long term.

“They know about carbon risk – they need some carbon upside.”

Kingsbury added: “As net zero becomes the law of the land, what have you got in your portfolio?”