Green tech investors: do they invest? What do they invest in?
During his address at the COP26 UN Climate Summit in Glasgow, Prime Minister Narendra Modi committed to a net-zero emissions target for India by 2070.
In the past few years, clean-energy power sources such as wind and solar have become competitive with fossil-fuel-generated energy and costs for rechargeable batteries plummeted. Mounting concerns about the impact of global warming and company commitments to reduce carbon emissions have also motivated investors. Another explanation is the rise of investing focused on environmental, social and governance (ESG) factors. The pandemic has accelerated investors’ need for indications of long-term business sustainability, as well as financial performance. As such, investors are now actively seeking ESG indicators as part of their investments and incorporating ESG investment analysis as part of diligence. This trend is set to increase in 2022 as ESG becomes more of a ‘must-have’ for investors. Global flows into ESG funds topped $178 bn in the first quarter of 2021, up from $38 bn in the same quarter in 2020, according to Morningstar, a research firm. On average about two new ESG-focused funds are launched each day!
The total value of acquisitions in India's renewable energy sector surged by more than 300 per cent to $ 6 bn in the first 10 months of 2021 (till October) from less than $1.5 bn reported in 2020, according to the report released by the Council on Energy, Environment and Water - Centre for Energy Finance (CEEW-CEF) and the International Energy Agency (IEA). It signals enhanced appetite from companies to invest in climate-friendly technologies and opportunities for investors to book profits and re-invest proceeds in new projects, or even exit completely, according to the report.
So, what are Investors investing in?
Reduction of carbon impact: Reliance Industries has signed an MoU with the government of Gujarat state to invest 5.9 trillion rupees ($80 bn) in green projects, according to a company announcement to the National Stock Exchange of India. The investments would, if carried out, make the western state achieve net-zero carbon emissions by 2035.
Zypp Electric, a company on a mission to make all last-mile deliveries electric, recently raised $7 mn in a Series A round last year.
2. New Consumption patterns: 5 Southeast Asian countries are responsible for 60% of ocean plastic pollution. ITC Ltd has collaborated with Invest India, a non-profit venture by the central government for national investment promotion and facilitation, to crowdsource innovative ideas for single-use plastic substitution and automate waste segregation. Under the collaboration, ITC Paperboards and Specialty Papers Division (PSPD) has launched the ITC Sustainability Innovation Challenge, which would support innovative startup ideas on sustainable packaging and smart waste management solutions
(Also Read: Let's Make Our Packaging Greener)
Within the first six days of 2022, Bambrew, a sustainable packaging development company which provides a sustainable and plastic-free alternative in packaging, raised more than $2 mn.
3. Embracing the circular economy: According to the National Commission on Population, India’s population is expected to reach 1.53 billion by 2036. India produces 277.1 million tonnes of solid waste every year, which is likely to touch 387.8 million tonnes in 2030. Fortunately, there is one flicker of hope: The circular economy. As its name suggests, it is a closed-loop business model that allows companies to recycle and reuse various products in new ways after their life cycle ends. In other words, moving from a “make-use-dispose” system to a “produce-use-reuse” system.
(Also Read: A Fashionable Circular Economy)
Circulate Capital Ocean Fund has committed to invest US$19 million in four leading companies that are using technology and innovation to scale and transform India’s waste management and recycling value chain. By 2030, the portfolio companies will have diverted 5 million metric tonnes of plastic waste from the environment cumulatively, which is the equivalent of nearly half the amount of plastic waste India generated in India in a year.
Uruvu Labs, a company that develops renewable water technology with inexhaustible atmospheric moisture and renewable energy to produce drinking water, has also raised funding in the past year. Another startup, Trashin, an online marketplace to recycle waste, raised its seed round in late 2021.
With solid support from the Indian government, investment in green tech has become safer than ever for investors. Whether the focus is clean manufacturing, energy efficiency, renewables, sustainable packaging, or a host of other focus areas, it is important that funding flows towards solving some of the planet’s most pressing problems.
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