One of India’s biggest sustainable development challenges is job creation. To deliver economic opportunities to the country’s nearly one billion working-age people, the private sector and policy-makers alike are increasingly focusing on the climate transition.
“That should be our focus – growth [in] jobs with clean technology,” said Amitabh Kant, India’s G20 representative and former head of the government think tank NITI Aayog, at last month’s Indian Venture and Alternate Capital Association convening in Delhi.
Meeting India’s ambitious climate goals, which includes nearly halving its carbon dioxide emissions and bringing 500 gigawatts of renewable power online by 2030, could yield nearly 30 million green jobs.
“Its not just about reducing pollution, but creating jobs,” said Raj Pai of GEF Capital Partners, a climate-focused private equity firm that has invested in North America, Brazil and India. Its India portfolio includes Hero Motors and Electra, two manufacturers of electric vehicle motor components, climate-resilient agricultural seed developer SeedWorks, and Premier Energies, a solar cell maker.
“Climate will out-deliver financial returns, bigger than any other sector we’ve seen thus far,” predicted Ruchira Shukla of climate fund Green Marble VC.
Commercial vs. concessional
The IVCA, India’s flagship trade body for private equity and venture capital funds, began hosting an annual green investments conference three years ago, amid a boom in commercial investors’ climate interest. This year’s summit took place amid a dip in climate investing in India, and against the backdrop of the US’s climate retreat. Most of those in the room were investors and startup founders that are heavily focused on climate and green sectors.
Despite headwinds, they’re pushing ahead with their climate strategies.
Singapore-based Fullerton Fund Management, which manages about $40 billion for insurers, pension funds and other institutional investors, sees that institutional investors are still looking for risk mitigation in climate-lens investing. It last year closed a $100 million Carbon Action Fund, to make private equity investments in decarbonization solutions in India, Indonesia and other Asian markets. The firm’s goal is to prove to investors that commercial returns are possible in climate investing.
“What we have set out to demonstrate through our fund is that we can invest and generate returns that are commensurate to what sector-agnostic funds generate,” said Fullerton’s Akhil Jain.
Family offices in Asia are also showing more interest in climate-lens investing. “We need to now create more case studies to attract this capital,” said Satya Bansal, of Singapore-based Blue Ashva Capital, which looks to make longer-term investments in sustainability-focused companies in the region.
Geographic shifts
India has worked to position itself as an alternative manufacturing hub to China on critical climate-transition technologies and materials. Japan in particular has seized on climate procurement and investment opportunities in India.
“Japanese interest in the climate space has been picking up in the last 12 to 18 months,” observed Akshay Panth, of NEEV Funds, part of the state-run State Bank of India Group.
Kazushige Kobayashi, of MCP Asset Management, an alternate asset manager with offices in Tokyo, Hong Kong, Seoul and Chicago, said Japanese investors “are wondering how they should change [their] asset allocation,” which has until now largely focused on the US, followed by Europe. They “are looking at India very positively now,” he said, due in part to the US’s climate retreat.
“I don’t think we need to bother about the US,” Kant reassured investors attending IVCA. Other regions have sustained commitments to their climate goals. Japan and also Europe are showing increasing interest in India as a climate hub, particularly in renewable energy technologies and generation. His advice to investors in the room: “Don’t follow the US, as far as green energy is concerned.”
Underinvested opportunities
Much of the climate investing in India focuses on just two themes: renewable energy and electric vehicles. Ecosystem builders, think tanks and networks like Impact Investors Council and Climate Policy Initiative, are working to engage investors in smaller but growing green opportunities. Sustainable cooling, for example, was highlighted in a recent report by IIC and CPI as an emerging green investment opportunity in India. The report estimates that the cooling solutions in India could represent a $1.5 trillion investment market.
“Between 2023 and 2025, India’s heat-resilience and sustainable cooling space saw limited but emerging investor interest across energy-efficient appliances, cold chain solutions, and digital building controls,” said the report.
Startups like Atomberg, which makes energy efficient fans; 75F, which reduces cooling-related energy costs using AI and predictive maintenance; and Ecozen, which leases solar-powered cold rooms, have already successfully secured private investor backing.
The report also drew attention to business models that are making cooling more affordable. Some companies now provide cooling as a service, in which they bear the capital cost of installing the cooling system, and users pay a rental or fee for use.
“This eliminates the burden of upfront costs and supports the dual benefit of climate mitigation and adaptation,” said the report.
IIC and CPI identified five other green tech sectors with the potential to create both high climate and economic impact in the next three to five years. These include battery energy storage systems, green hydrogen, climate smart agriculture, lithium-ion battery recycling and water.
“Technologies like battery storage and green hydrogen are moving beyond isolated demonstrations toward utility-scale projects, backed by government tenders and corporate commitments,” the report said.
One of India’s biggest climate investment opportunities isn’t in the tech realm at all; it’s supporting the green transition of millions of small and mid-sized businesses.
Small businesses generate 40% to 60% of all business-related greenhouse gas emissions. “Less than 40% of these [small businesses] have any mitigation or adaptation practice in place,” said Monu Jain of impact investment firm Aavishkar Capital at the IIC’s October Green Investment Forum in Delhi.
Aavishkaar facilitates green loans to small businesses in India’s core economic sectors and those supporting responsible consumption and sustainable agriculture. British International Investment, the UK;s development finance institution, and emerging markets investment firm Symbiotics have been working to facilitate green small business lending in India and other emerging markets through a pair of “basket bonds” that capitalize local lending institutions.
Such strategies have a climate and economic impact far beyond India, said Jain.
“If we support emerging companies, which are directly or indirectly exporting either products and services to developed economies, we are cleaning the entire supply chain and thus amplifying the impact.”
