The companies say that combining resources will provide access to a wider range of investment opportunities, which they believe will result in higher returns for investors. They previously worked together on the Catalyst Stargate EIS growth fund, which invests in a portfolio of small and early stage unquoted UK companies. The fund closed in April 2007 and has made four investments in a range of sectors.
The new EIS fund differs in that it will focus on environmentally friendly investment opportunities within small and early stage unquoted companies. It will aim for growth by investing in at least four companies.
The companies in the portfolio will be those whose activities, products or services are considered to be compatible with sustainable development and an environmentally responsible outlook. Companies with a strong competitive advantage that have developed a unique product or service with intellectual property or superior technology will be of particular interest.
The fund will look for companies involved in renewable energy and energy efficiency, sustainable living and consumption, waste management and recycling technologies, environmental services and water treatment and preservation.
Companies are assessed according to their business model and how this translates into a strong and sustainable competitive advantage. They must have low costs and do something different from the competition, which results in customers preparing to pay a premium price. Companies that do not achieve competitive advantage because they have the same costs and do the same as the competition are ‘marooned in a profitless zone’, according to Stargate.
Green issues are becoming mainstream concerns due to increased awareness and legislation around the world. This has led to greater demand for green investments, not just from ethical investors, but also from those who see the environment as a growth area.
However, the companies in this portfolio are likely to be volatile due to their small size and early stage of development. Diversity within the portfolio may help to reduce risk but the number of investments made will be dependent upon the availability of opportunities and the amount of money raised under this offer.