Blue and green: shades of sustainable finance at Cyan
14 May 2020: Cyan Finance is a specialist green, social and future capital provider, and Richard Lockington is one of the company’s evangelists. He talks to Insights about his passion for sustainable investment.
“I wanted to shape the future,” says the ACA-trained investment professional, working on behalf of a finance company with an eye on all things green. He may have come up the traditional route but, after training as a chartered accountant, working for a valuations company gave him the insight he needed to work directly on transactions. He became passionate about moulding the business landscape and the way businesses interact not just with other businesses, but also nature, people and the future.
Along the way, Lockington learned about deploying capital to British innovators, and funding those who are not well served by traditional funds. This is before he professionally collided with the green agenda.
“There is huge talent and academic success here in the UK,” says Lockington. “But we are very bad at turning that potential into great businesses. We need to facilitate those businesses and grow them into global successes. It is our responsibility to grow success and not just be passive investors.”
He says that innovation amongst the investment community has lagged behind that in the UK start-up ecosystem. “Getting your first institutional investor on board is still difficult for SMEs. Many small innovative businesses still don’t get past that part of the growth cycle.”
He is emphatic that investors have a responsibility to help people who are taking risks and developing future-facing technologies that will be the bedrock of our economy. There is a double win if you fund these types of business, he says. First off, if your risk assessment is good, there is likely to be a positive financial return; and secondly, over time, these businesses will create jobs, pay taxes and contribute to the economy.
But there is more to Lockington’s thinking than just that. The crux of his philosophy is: “Let’s do good stuff and not just move the numbers around.” He is talking green.
That is why he joined Cyan Finance. It is what he wanted to do as a professional. “We are 100% focused on sustainable investment,” he says. “We are backed by private wealth and are deploying that capital for a financial return, but we are only supporting green.”
It is not always easy to draw the line between sustainable and not so sustainable projects when you are not immersed in it yourself. Lockington helps us draw the line. He talks about a post-transition economy and says Cyan only invests in companies that fit that world.
“You have to ask yourself whether they will have a place in a new sustainable world?” he says. If the answer is unequivocally “yes”, then you have a potential target for investment. “We are simply driven by the need to address the climate emergency.”
So is it just about the project? What other factors drive investment decisions? “Management teams usually give you a good steer on their mission,” he says, giving updated credibility to the old adage about investing in people. “We never say we are better at your business than you are. Fundamentally, we are facilitating management to get the job done.”
He continues: “We pick the companies that we invest in if there is the potential for a long-term relationship. We can put our own capital to work but also undertake advisory work to support larger fundraises, ensuring that companies have a well-diversified and supportive shareholder base for the future.”
He talks about closing the prevailing funding gap which is keenly felt by green SMEs in particular. The problem, he says, is that most finance firms are more attracted to bigger ticket, “easier” transactions and lack a culture of sustainability. Financing options are often limited to vanilla equity finance and this just will not do for innovative companies developing next-generation sustainable products. The result is that innovative SMEs that are addressing climate change can get stuck in this gap.
Happily, Cyan sits squarely in this funding gap. It deploys its own capital through both debt and equity, and understands the environmental, social and financial value in helping the SMEs that traditional markets have overlooked. Asset finance options are also on the table. The whereabouts of a company is not really a concern. “Core competencies are more important than location,” he insists.
Lockington is supportive of his profession and is emphatic that it is not accountancy that threatens to strangle growth in this area but the availability of finance itself. The situation is now urgent, and it is time for everyone to act, he says. “We have 15-20 years to change the way we live to make sure the planet is still habitable. Otherwise we will have a species crisis. The planet will be there, but we won’t.”
He continues: “The green agenda is getting people animated. Humans are great at innovating and we are slowly seeing much-needed green investment announcements coming through.” Cyan Finance is at the forefront of green investing and is constantly on the lookout for new and exciting opportunities to deploy capital and support sustainable businesses.
And it is all so relatable, he points out. “Investing in green – this is what consumers want, what the planet needs and will be the investment choice people will make in the future.”