Investment Conference: We can collectively make a real difference

Scotsman Investment Conference, Scotsman Hotel, Edinburgh. Image: Scott Louden

David Farquhar, Chief executive of pioneering vertical farming company Intelligent Growth Solutions (IGS), headquartered in Edinburgh

The business started from a landowner’s desire to grow crops all year round. Our solution? Imagine a field, cut up into snooker tables, then stacked in racks. Instead of green baize, we have crops – and on the bottom of each one, we “make the weather” for the table below.

With 52 racks inside a 9 metre-high tower, we could grow 52 different things from seed potatoes to tree seedlings. We’ve grown 250 different crops in our research centre near Dundee. We make the machine, commission it, and support it – a farmer runs it.

In November 2017, IGS was essentially an R&D project. I joined to turn it into a business and raise institutional finance.

We did series A funding in 2019, and series B in 2021. In between, Covid hit, so after series A, the brakes went on. At the start of Covid, we were 25 people, we’re now 270. We made our first sale in the third quarter of 2020. We’ve now had £300 million in sales and are building farms on four continents.

I wanted to raise money from the most credible, prolific agritech investors. They are all American. Series A was led by STG (Seed to Growth) Ventures from Chicago, followed by AgFunder from Silicon Valley, with support from the Scottish Investment Bank.

The second close was a new fund created to invest in us in New York, Osprey AgScience.

Series B was led by impact investor COFRA Holding, owned by Netherlands family the Brenninkmeijers. The Series A guys followed the money and we also got DC Thomson and another agritech investor Cleveland Avenue from Chicago.

Our business is hugely impactful because we have food shortages and empty shelves. There are world shortages of vanilla, saffron and chillies. Potato harvests are a disaster in most of the developing world, caused either by flooding or drought.

When I was born in 1958, the planet had 2.8 billion people. In my lifetime, it will hit nine to ten billion. We have to grow more food in the next 30 years than in the 10,000-year history of agriculture. IGS won’t solve food shortages or the climate crisis alone, but we’re another tool in the toolbox.

Our investors want returns and are willing to invest in high-risk, high-return businesses like ours. But they want returns that are impactful – a combination of feeding people and reforestation.

We can build a tower anywhere, but prefer brownfield sites close to the point of production or consumption, to remove food miles. The impact on the planet is all about reduction in emissions. We put nothing in the ground, or the water course, and send nothing into the air.

The impact of our business is also important to staff, especially 25- to 40-year-olds. When asked: “Why did you come here?”, almost everyone says for a career and package but also for the “purpose”. They use ‘purpose’ more than impact. Hope is another word we hear a lot.

Businesses in Scotland should be confident about going out for investment if they have the right proposition, right team, right market fit and right business model. I wouldn’t say we had any questions about, “why Scotland?”

We’ve had encouragement from the Scottish Government and Scottish Enterprise. The SNP wrote vertical farming into its manifesto at the last election, then put it into the 100-day plan. Then they didn’t do much – but that’s beginning to change. We need the government to encourage and support this, but also get the other infrastructure in place to make it happen, because Scotland needs to become food secure.

Dr Lesley Sawers OBE, Board member of Crosswind Developments, which wants to create a new community on a site beside Edinburgh Airport. She is also GB and Scotland Commissioner, Equality and Human Rights Commission.

Policy-making and planning regulations are lagging behind the business and investment world in supporting the creation of sustainable future communities.

We’re building a new future with the £1 billion Elements Edinburgh project, which features housing, a digital quarter, offices, and 42 per cent of open space, unique in such a large scheme.

Many of you probably think: “What is an equality regulator doing speaking at an investment conference?” I’ve worked across the public and private sector, including in economic development. For me, that’s the opportunity we have in Scotland, for them to work together.

So with the £1bn that Crosswind is proposing to invest in Edinburgh, we hope we can work with public partners, supply partners and commercial partners to leverage money to address some of the wicked societal problems we have here.

This is a unique opportunity. It’s not happening anywhere else. I work on Levelling-Up funds across England – they are far behind Scotland.

We’re doing work with City Deals, but they haven’t leveraged private investment. We want to collaborate, co-operate, and get public and private sector partners working together to make Scotland fairer and richer.

I think Scotland is a very attractive destination for international investors. That’s borne out by the fact that Global Infrastructure Partners [which already owns Edinburgh Airport] is prepared to invest £1bn in the Crosswind project.

Scotland has access to a skilled workforce, and a supportive environment for investors to come into. I think we have to look at the policy and planning frameworks.The public sector has to become more responsive, more tuned into what businesses are looking for.

In terms of a scorecard, Scotland is probably seven or eight out of ten.

I think the other two points are things that we could sort out, and are related to the less supportive environment in terms of planning and policies. We definitely want leadership from the Scottish Government to encourage businesses to come here.

David Atkin, Chief executive, The Principles for Responsible Investment (PRI) network

PRI began in early 2005 when then-UN secretary-general Kofi Annan invited a group of the world’s largest institutional investors to develop principles for responsible investment.

It started with 20 investors; now we have more than 5,200 signatories managing over US$125 trillion of assets.

Effectively, by signing up, you say you believe environmental, social and governance issues could be material to the way you deliver investment performance, whichever community you serve, and you agree to work with other investors.

We have a series of programmes that help individual signatories become better responsible investors, but recognise that you cannot solve problems like climate change on your own. So we create collaborative forums where signatories can work on collective initiatives.

Also, we are seeing governments starting to overlay regulation onto ESG, so we have a big role in bringing the investor voice to the table to discuss that.

Further momentum towards responsible investment can be seen by governments beginning to articulate pathways to progress around the Paris Agreement, investors coalescing around net-zero targets and kicking off key collaborations on human rights. The International Sustainability Standards Board is making inroads on creating a global baseline of sustainability disclosures at the company level.

Frankly, The founders of the PRI in 2005 would be amazed, and this progress couldn’t have been achieved without the engagement of the responsible investment community. However, we can’t be complacent. On the other side of the scales, – we’re experiencing an energy crisis, rising inequality and a changing geopolitical environment.

Responsible investment continues to operate in a financial system designed to reward short-term investing. We want to help the industry to shift to reward those who take a long-term perspective and to create an enabling environment for responsible investment. We want to help investors understand the long-term thematics that may affect assets sitting on the balance sheet now or in future.

So how do we proceed? If you’re an investor or PRI signatory, you can’t solve this on your own, but we can collectively make a real difference.

Jane Dennyson, Founder of Thrive Consultancy, which advises UK listed companies on environmental, social and governance matters

Our clients are not necessarily impact-led or labelled as ESG companies. So many traditional companies are going through a transition and need help. I started Thrive because I saw sustainability was very much a side agenda running alongside business.

Many companies were missing the point that this is so fundamental to sustainable commercial growth. Our clients are usually triggered to come to us through pressure from one of their main stakeholder groups, or a combination of them. Sometimes clients will be asked by institutional investors to provide more transparency around governance – quite granular details around how they’re going to move to net-zero, or what they’re doing to tackle social inequality.

Other stakeholder groups are customers, whether consumer or corporate, whose buying decisions are more and more based on the ESG performance of a company, and employees.

To attract and retain the right talent, you need a very strong proposition. You can’t get away with a bland CSR policy anymore. It needs to be meaningful, and you need to demonstrate it. We help clients build an ESG strategy, based on materiality. We assess the company’s impact on the outside world and financial materiality – what do stakeholders see as really important for your business to be tackling? That allows focus and provides the foundation for an ESG strategy. We then help build roadmaps with actions and a clear, accurate non-greenwash narrative to play back to stakeholders.

It’s like a risk analysis framework to identify where your risks and opportunities are and then make plans about how you’re going to manage them, and tell that story to your stakeholders, who are ultimately going to impact your commercial success.

In terms of Sccotland’s attractiveness, it is part of the UK, which does not currently have a clear Net Zero strategy or sustainable finance roadmap. For investors across the world wanting to see a clear commitment from the government, we don’t yet have that, which makes it quite hard for them to see stability, confidence and commitment.

Eline Lofgren, Investment director at Evelyn Partners (formerly Tilney, Smith & Williamson)

At the beginning of my career, this [the impact of investments] was not a topic that I felt my industry was particularly interested in. So I’m delighted it is such a focus now.

My day job is to manage portfolios – primarily for charities and private individuals, but also pensions and corporate entities. Investing with impact is important.

I sit on our Stewardship and Responsible Investment Committee, and I take

special interest in what we would call proxy voting services, which relates to how we as investors can influence the behaviour of large corporations and push them in the right direction –

as owners of shares – to do what’s right from a sustainable and responsible point of view.

Proxy voting is one branch of an active ownership strategy. It’s a powerful tool and a way to enact real change.

For a large company, a shareholder of a certain size can put a proposal up relating to transparency – and companies like ours are able to go and support this agenda by voting on behalf of our clients in favour of actions that improve transparency and make improvements.

It’s really tangible.