Zeti featured in The Times UK's Future of Finance report

October 04, 2023

Written by Chris Stokel-Walker, Thursday 5th October 2023

Businesses are caught between a rock and a hard place, needing to update vehicle fleets while facing eyewatering costs for new EVs. That’s where an investment opportunity lies.

The green revolution is gathering pace – and quickly. Climate and clean and green tech is a booming market, with more than $495 billion invested in the sector in 2022 – a number reaching new records every year.

There’s a recognition that green investment is beneficial to investors across the world. It provides environmental, social and governance (ESG) benefits, while signalling to investors and customers alike that your business acknowledges the climate crisis – and more importantly, is doing something to help. Most investors have pursued renewable power projects or green energy investments to fund, often seen as the low hanging fruit for investors.

“Institutions have invested heavily in renewable energy such as solar and wind,” says Dan Saunders, founder and CEO of Zeti, a financial technology company which is revolutionising the way that transport is financed. “A lot of money has gone into those assets, and for good reason. But at some point it creates a concentration of risk in the underlying asset class. There’s no diversification.”

But there’s an emerging, innovative opportunity for those investors who are truly forward-thinking, and it’s all around us. Transport is one of the major contributors to the world’s carbon emissions – accounting for around a quarter of all emissions worldwide. Greener alternatives are available: electric vehicles (EVs) are becoming increasingly common on the world’s roads, and incentivised by governments across the globe.

But EVs are also costly – at times, twice the amount of their gas-guzzling alternatives – making them beyond the reach of most people. “Barely a day goes by without a news story about the pollution caused by transport. Governments and society want and expect a shift to zero and ultra-low emission vehicles,” says Saunders. “At the same time, these vehicles can be very expensive to purchase.”

Even petrol-powered cars are increasingly bought on finance, with around 90 percent of new vehicles funded that way in the UK, according to Saunders. At the same time, people are using more on-demand services, whether that’s via the likes of Uber or last mile delivery for their Amazon purchases. As a result, fewer individuals than ever before need to own vehicles. “You’ve got this increasing view that transport is becoming a service,” says Saunders. “Less and less people own vehicles; it’s on-demand, and they’re being owned by fleets. We’ll soon come to view transport as a utility, just like energy.”

Those companies providing the fleet of on-demand vehicles are themselves tightly run. “They  have volatility and seasonality, like any business,” says Saunders. “They’re always looking to improve cash flow to make sure they’re financially secure.”

As a result, demand for creative financing solutions of clean transport is increasing, in turn creating opportunities. “Clean  vehicles themselves can be a new, sustainable investment opportunity for these financial institutions, and not just the charging infrastructure to power them,” says Saunders. “Rather than invest in an array of solar panels that generate income based on the their energy output, you could invest in a fleet of zero-emission vehicles, that generate income based on their utilisation.”

Saunders argues that by leveraging real-time vehicle data, investment in clean energy vehicle fleets can now have as big an impact as renewable energy investment. “Unquestionably renewables investment is good for the planet and will be needed to power clean transport. But transport pollution is immediate, and the localised health risks are obvious. Making capital flow into the adoption of zero-emission vehicles is good for everybody,” says Saunders. It generates good returns, which Saunders says are currently commensurate to the rate of inflation, beating other investment products, whilst providing an enduring benefit to society.

Zeti is closing in on a thousand zero and ultra-low emission vehicles being managed by its digital platform, including a range of London taxis operating on electric power.  Half a billion dollars worth of further enquiries have amassed from businesses looking to have their vehicles financed by Zeti’s lending partners. “We easily have demand for another several thousand vehicles that are ready to be financed straight away,” says Saunders, “and barely anyone knows about us yet. That’s what I’m excited about, to see the positive environmental impact that Zeti can achieve once fleet companies and investment institutions see this new opportunity to generate and share value.” That has interested investors in the business, including early stage US venture capital investors Powerhouse Ventures and Toyota Ventures, the VC arm of automotive Goliath.

With obvious parallels to the growth of renewable energy investment, the clean transport investment revolution appears to be upon us. And it looks like it could be big. “Zeti’s aim is to be an enabler, the ‘middleware’, if you will,” says Saunders. “The demand for clean transport finance is clearly there. It’s just about whether financial institutions want to be leaders in this field or followers.”