Shaun Kingsbury: “It will take an investment of many trillions of dollars to move to a greener economy”

Words: Florence Robson

As he joins The Conduit Investment Advisors as CEO, we speak to Shaun Kingsbury, former CEO of the UK Green Investment Bank, about the importance of capital market solutions to global challenges and the impact he hopes to achieve in his new role.

What persuaded you to join The Conduit Investment Advisors?

Put simply: we share the same mission. At Conduit Investment Advisors we want to drive positive change and aim to do that by investing in businesses that can help solve various key challenges. At The Conduit, there are a number of key themes from gender equality to health and education, but we have chosen to focus initially on the climate challenge as this seems to be the biggest existential threat facing us all (setting aside the current pandemic).

I have spent the last 12 years of my life focused on finding capital markets solutions to climate problems. I believe that the scale of the climate challenge means that it will take an investment of many trillions of dollars to move to a greener economy and this scale of capital cannot come from governments, from impact funds or from charitable donations; it requires institutional capital at scale. Experience tells me that this money will only move when you can show that it will receive an appropriate risk-adjusted return. My job, particularly when running the Green Investment Bank, was to show that private capital could make that great risk-adjusted return in UK Green Infrastructure. Now I want to show that again in a number of related sustainable focused funds or products.

What does success look like for The Conduit Investment Advisors over the next five years?

I guess I have three key measures of success. The first is business success, in that we have built the team, successfully raised and invested our first fund, have raised a follow-on fund and hopefully launched another product or two. The second measure of success is the green impact that we have created through the investments that we have made. We are currently determining the best and most transparent way to measure and report this, but it may include indicators like carbon emissions avoided or green energy produced.  The third – and perhaps most important – factor is as follows: have we created an approach or business model that can be admired and replicated around the world? Imagine if multiple investment platforms were created that copied our model and each found the best green businesses to back in their chosen sectors or chosen geographies, and each of them was successful in producing both great financial returns and positive green impact… Then I would concede that we had been truly successful!

For each in-house fund or product that you launch, you will have to balance impact and profit: how do you plan to achieve this difficult goal?

This is a really good question and one that I am constantly asked. However, I tend to think about this a bit differently. I don’t really see a trade-off between producing green impact and producing great risk-adjusted returns for investors. I tend to think of the impact first of all and as a binary step in the investment process.

Before taking an opportunity forward you have to ask whether or not this investment opportunity is green. We will need to define carefully what constitutes a green project or company as nearly all businesses produce some negative impact through their operations, alongside the positive. If an opportunity is not green by our standards, then we won’t invest. If it does pass the green impact hurdle, we then need to understand the risks and returns but in a financial sense, in order to make great risk-adjusted returns. If we do this successfully, we’ll get more capital to manage which we can invest profitably in companies that make more positive green impacts – a virtuous circle. However, if you start taking too many business risks which don’t match your financial returns in the hope of making a green impact, then your investments may fail; if they fail financially, they will not be around to deliver the green benefits you hoped for and you won’t be given any more capital to invest. I think it is really important to be both green and profitable, and not attempt to trade off one against the other.

The landscape is quite different now to how it was when you led the Green Investment Bank, with many more impact and ESG funds out there. What is it that will set The Conduit Investment Advisors apart?

I think what will set Conduit Investment Advisors apart is the membership of The Conduit and the network and ecosystem of associated people and companies. Quite simply, that will be our USP. The very fact that there are now larger numbers of impact funds around shows that there must be demand from investors to find ways to invest their capital and deliver positive impact. What started off many years as a minority product has now really come of age and even the largest fund managers around the world are pulling together their own impact funds. However, the culture and style of investment of many of these entities may not sit well with a mandate to create positive impact and positive returns.

At The Conduit we have entrepreneurs, academics, investors, NGOs and family offices, all of whom believe in the desire for positive change. We at Conduit Investment Advisors share that goal and we will find investment opportunities that deliver this impact with the appropriate risk-adjusted returns. It will be the core of what we do, it will drive our culture and our approach to investing and it will not be an afterthought.

From both a pre- and post-COVID perspective, what do you see as the most promising recent developments in the climate investing sector? What challenges remain (or have emerged as a result of the coronavirus crisis)?

I think that the impact of COVID will continue for some time. Firstly, we need to deal with the virus and the resultant health issues, and then we will need to deal with the economic fallout that lockdown and uncertainty has caused. It is far too early to predict the exact outcomes; it is an overused metaphor but this really is a marathon and not a sprint. However, there are early indications that more sustainable companies, or those with more long-term sustainable business models, have been less impacted than some others. We certainly saw this previously in the credit crunch, but it is still too early to predict that this is true for a post-COVID world (although of course I hope that it is!).

We have all seen the iconic pictures of London, New York, New Delhi and other global cities free from the chaos of traffic, pollution and smog. City inhabitants around the world will not forget the change to the air they breathe. I see a possibility that a focus on clean air will emerge as a key investment opportunity in a post-COVID world. In the UK, the Government entity Public Health England has estimated that between 28,000 and 36,000 people die per annum of the effects of long-term exposure to air pollution. I hope that cleaning up air pollution is an investment theme that we can get behind and help migrate the world to cleaner and greener transportation. Of course, you can’t see CO2, so we shouldn’t forget that much work needs to be done here too!

For the full press release announcing Shaun’s new role as CEO of The Conduit Investment Advisors, please click here. To learn more about Conduit Capital, please click here or email info@conduitcapitalpartners.com.