
Key Highlights
The buzz around climate investing has never been louder. In his annual letter in 2022, BlackRock Chairman and CEO Larry Fink wrote, “It is my belief that the next 1,000 unicorns won't be a search engine, won't be a media company, they'll be businesses developing green hydrogen, green agriculture, green steel and green cement.”
Such is the green energy opportunity now that trillions of dollars are being committed by countries towards reaching the net-zero target. Back home, Avaana Capital (a climate-focused VC fund) has been scouting for young Indian startups that are building sustainable projects. “With India having 20 per cent of the world’s population, at least 20 per cent of the 1,000 green energy unicorns should be here,” says Anjali Bansal, Founder of Avaana Capital.
While speaking at the IVCA Conclave 2023 in Mumbai, Bansal shared, “Climate is the biggest problem statement facing the world today. But wherever there is a problem, there is also an opportunity. India is on a tremendous economic growth journey over the next two decades. We will invest in climate not just because it will save the planet, but it will also generate a lot of good returns.”
Be it renewables or solar energy or battery storage or EVs or green hydrogen, India is already emerging as a huge market for climate investments. Most large companies have real intent to solve climate problems. However, they may not necessarily have the solutions themselves. And those innovations will come from startups.
Karan Mohla, General Partner at B Capital, says, “Both start-ups and innovators on the ground level have to work hand-in-hand with corporations and traditional industries. The scale at which that innovation can be applied in the real world won’t happen with just startups. Getting to that level of distribution and end usage can happen with the support and cooperation of traditional industries. The need to work together is much more imminent today.”
The good part is that there is a lot of “climate capital” out there today, unlike in the earlier decades. “In the 90s and 2000s, of all the clean tech funds raised, two-thirds disappeared. That was Climate 1.0. But this time it is different because we are all freaked out about the climate,” says Vikram Raju, MD and Head of Climate Investing - Private Credit & Equity at Morgan Stanley.
“There’s big money; $100 trillion of climate capital exists now. And there’s money to be made too. Inflationary pressures, energy prices and corporations making net-zero promises mean that everyone in the supply chain has to figure out a way to decarbonise. It is an exciting theme no matter what investor you are,” he explains
The level of interest in climate opportunities is high among global investors, including LPs of funds. “It’s driven by the fact that there’s a multi-trillion dollar opportunity for decades to come,” says Cate Ambrose, CEO and Board Member, GPCA.
She further adds, “Long-term investors like the Canada Pension Plan Investment Board, and sovereign funds like GIC or Temasek are not thinking about the next return cycle. They want to put in large scale money for decades to come.”
While climate finance may be easily available, Bansal says it is imperative that the capital is deployed in “large, commercially scaled enterprises”. “It shouldn’t go in niche projects. It should go to purpose-led founders who are fiercely ambitious about building large, valuable, commercial companies,” she added.
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