Clean Growth Fund II Secures £81.5 Million Commitment for Climate Innovation
£81.5 million second close brings climate fund past halfway target
Clean Growth Fund has raised £81.5 million in the second close of its Fund II vehicle. The announcement follows commitments from Border to Coast Pensions Partnership and Strathclyde Pension Fund. Consequently, the fund has passed the halfway point toward its £150 million target. Moreover, the development adds institutional weight to a UK climate venture platform that began operations in 2020.
Border to Coast Pensions Partnership committed £22.5 million through its UK Opportunities Fund. Meanwhile, Strathclyde Pension Fund added £10 million, bringing its total commitment to Fund II to £30 million. The second close demonstrates continued pension fund appetite for UK climate technology investment. Furthermore, it strengthens Clean Growth Fund's capacity to back early-stage companies addressing greenhouse gas emissions and resource efficiency.
The original Clean Growth Fund vehicle closed at £101 million in 2022. That first fund drew support from the Department for Business, Energy and Industrial Strategy alongside private investors including CCLA, Aviva Investors, and several pension funds. Fund II began fundraising in 2024 with an initial close at £49 million. Strathclyde Pension Fund participated in both closes, while Islington and East Riding pension funds joined as new backers.
How Clean Growth Fund approaches climate venture investment
Clean Growth Fund positions itself as a specialist climate venture capital investor. The fund typically writes first cheques between £500,000 and £5 million. Its investment focus spans power, transport, buildings, industry, and waste sectors. Essentially, the fund targets early-stage companies working on technologies that reduce emissions or improve how businesses use resources.
The platform was established to accelerate commercialisation of clean technologies. Therefore, it sits within the UK government's broader Net Zero Innovation Portfolio framework. The fund combines capital deployment with operational support for portfolio companies. This approach reflects the capital-intensive nature of climate technology development and the longer timescales often required for commercial validation.
Clean Growth Fund states that its portfolio companies are on track to abate 46 million tonnes of CO₂-equivalent annually by 2030. This projection underscores the environmental ambition embedded in the fund's investment model. However, early-stage climate ventures typically face significant technical and market risks before reaching commercial scale.
Border to Coast commitment signals institutional confidence
Border to Coast Pensions Partnership's £22.5 million commitment carries particular significance. The partnership manages assets for eleven local government pension funds across England. As a result, it represents one of the largest pension pools in the UK local government sector. Its participation therefore brings both capital scale and institutional credibility to Fund II.
Local government pension schemes face growing pressure to allocate capital toward productive domestic investment. Additionally, these schemes must balance commercial return requirements with longer-term economic and environmental considerations. Climate technology venture capital sits at the intersection of these objectives. Specifically, it offers exposure to growth-stage UK businesses working on decarbonisation challenges that public and private sectors must address.
Strathclyde Pension Fund's continued backing across both closes reinforces this pattern. The fund's total £30 million commitment to Fund II represents substantial conviction in Clean Growth Fund's approach. Furthermore, the participation of Islington and East Riding pension funds at first close broadened the investor base beyond the original backers.
Second close timing reflects wider fundraising environment
The £81.5 million second close arrives during a challenging period for venture fundraising generally. Many funds have experienced slower capital commitments as institutional investors reassess portfolio allocations. Nevertheless, climate technology continues to attract institutional interest. This dynamic reflects policy pressure, regulatory change, and commercial opportunity converging around net-zero transition.
Clean Growth Fund's progress toward its £150 million target suggests that specialist climate funds with track records can still secure commitments. However, the pathway from first close to final close has lengthened for many venture vehicles. Pension funds in particular are conducting more extensive due diligence on climate investment strategies. They increasingly require clear frameworks for measuring both financial performance and environmental impact.
The involvement of Border to Coast at second close may accelerate momentum toward final close. Large institutional commitments often attract additional investors seeking validation from established allocators. Therefore, Clean Growth Fund's founder and managing partner, Beverley Gower-Jones, noted that Border to Coast joining Fund II takes the fund past the halfway mark toward its target.
What this means for UK climate technology companies
For early-stage climate businesses, the second close materially improves access to growth capital. Clean Growth Fund can now deploy additional resources across its target sectors. This capacity matters because climate technology companies often require patient capital willing to support longer development cycles. Moreover, many face specific challenges around scaling manufacturing, validating technology performance, and navigating regulatory approval processes.
The fund's £500,000 to £5 million initial investment range positions it to support companies at critical inflection points. Businesses at this stage typically need capital to move from prototype to pilot, or from pilot to commercial deployment. However, they often struggle to attract traditional venture investors unfamiliar with deep-tech or infrastructure-adjacent business models. Climate-specialist funds therefore fill a structural gap in the UK venture ecosystem.
Clean Growth Fund emphasises operational support alongside capital deployment. This approach reflects the reality that climate technology founders need more than funding alone. They require networks, sector expertise, and support navigating complex supply chains and regulatory environments. Consequently, the fund's model combines financial backing with hands-on assistance to help portfolio companies build, scale, and grow.
Pension fund climate investment continues to expand
The second close illustrates a broader shift in UK pension fund investment strategy. Local government schemes in particular are increasing allocations to climate-aligned assets. This movement responds to multiple drivers including fiduciary duty evolution, member expectations, and policy signals around sustainable finance. Additionally, pension funds face questions about long-term portfolio resilience as climate risks become more material.
Border to Coast established its UK Opportunities Fund specifically to invest in domestic businesses aligned with economic and environmental objectives. The £22.5 million commitment to Clean Growth Fund II demonstrates how pension pools are operationalising these strategies. Similarly, Strathclyde Pension Fund's sustained engagement across both closes shows institutional conviction in climate venture as an asset class.
However, pension funds remain accountable for commercial returns. Climate technology investment must therefore deliver financial performance alongside environmental outcomes. Early-stage venture carries inherent risks, and climate technology adds technical and market uncertainties. Pension trustees consequently require robust frameworks for assessing these investments within broader portfolio contexts.
Summary of key developments
- Clean Growth Fund closed Fund II's second round at £81.5 million, surpassing the halfway point toward its £150 million target.
- Border to Coast Pensions Partnership committed £22.5 million through its UK Opportunities Fund, adding significant institutional backing.
- Strathclyde Pension Fund contributed an additional £10 million, bringing its total Fund II commitment to £30 million.
- The fund focuses on early-stage climate technology companies across power, transport, buildings, industry, and waste sectors with typical first investments of £500,000 to £5 million.
- Clean Growth Fund's first vehicle closed at £101 million in 2022 with backing from government and private investors including pension funds and institutional asset managers.
- The fund's portfolio companies are projected to abate 46 million tonnes of CO₂-equivalent annually by 2030.
Implications for businesses navigating net-zero transitions
The Clean Growth Fund story carries lessons beyond venture capital markets. It highlights how institutional capital is increasingly flowing toward businesses with credible decarbonisation solutions. For SMEs considering net-zero strategies, this trend creates both opportunities and competitive pressures. Companies developing technologies or services that reduce emissions may find improving access to growth capital. Conversely, businesses without clear transition plans may face questions from customers, suppliers, and investors.
Climate technology investment also signals where market expectations are heading. Technologies receiving venture backing today often become standard procurement requirements tomorrow. Therefore, businesses should monitor which solutions are attracting institutional investment. These patterns can indicate where regulatory standards may tighten or where customer expectations may shift. Additionally, they reveal which technologies are approaching commercial viability.
For businesses participating in public sector supply chains, the involvement of pension funds in climate investment is particularly relevant. Local government pension schemes influence broader public procurement through their investment decisions. Consequently, businesses seeking public sector contracts should consider how their offerings align with the climate objectives these institutions are backing. Our sustainable procurement support helps suppliers understand and respond to these evolving requirements.
Companies facing carbon reporting obligations can also draw insights from this development. The technologies Clean Growth Fund backs often address the same challenges businesses encounter when measuring and reducing emissions. For example, solutions in the buildings, industry, and waste sectors directly relate to operational emissions many SMEs must now report. Our carbon reporting and compliance services help businesses navigate these requirements while identifying practical reduction opportunities.
Questions businesses should be asking
The expanding climate technology sector raises practical questions for UK businesses. First, what technologies currently in development might affect your operations in the next three to five years? Climate solutions receiving venture investment today often reshape markets within a decade. Therefore, businesses should assess how emerging technologies might change cost structures, regulatory requirements, or customer expectations in their sectors.
Second, how are your competitors responding to climate technology opportunities? Early adopters of emerging solutions sometimes gain cost advantages or market positioning benefits. However, premature adoption of unproven technologies carries risks. Businesses must therefore balance innovation with prudent risk management. This requires monitoring technology maturity, regulatory trajectories, and market adoption patterns.
Third, what does institutional climate investment signal about regulatory direction? Pension funds and other institutional investors typically conduct extensive due diligence on policy and regulatory risks. Their willingness to back climate technology ventures suggests confidence in supportive policy frameworks. Consequently, businesses should consider whether their strategies align with the transition pathways these investors are betting on.
Where to find additional information
Border to Coast Pensions Partnership publishes regular updates on its investment approach and portfolio allocations on its official website. These materials provide insight into how major pension pools are thinking about climate investment and UK opportunities. Similarly, Strathclyde Pension Fund reports on its investment strategy and climate commitments through its published materials.
The UK government's Department for Energy Security and Net Zero provides information on policy frameworks supporting climate technology development. This includes details on the Net Zero Innovation Portfolio and other programs designed to accelerate commercialisation of clean technologies. Additionally, the department publishes research and analysis on technology pathways for decarbonisation across different economic sectors.
The British Business Bank offers resources on accessing growth capital for innovative businesses, including those in climate and sustainability sectors. Its website includes guidance on venture capital, growth equity, and alternative financing structures. For businesses considering carbon reduction strategies, the UK Net Zero Strategy outlines government policy direction and sector-specific pathways.
Finally, our net-zero hub provides practical resources for businesses developing carbon reduction strategies. These materials connect policy developments, technology trends, and practical implementation guidance relevant to UK SMEs navigating the transition.