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The Driving Force behind Investments into Climate Solutions

10 December 2020

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Ernest Heng

The Driving Force behind Investments into Climate Solutions

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4 min read

As COVID-19 continues to pose challenges across the globe, it has also shined a spotlight on the climate crisis and the need for governments to incorporate “green” recovery measures in their recovery packages. A number of investors are leading the charge to fund innovative tech solutions to combat climate change and empower companies to bring about a greener future.

For investors either looking to invest in or make better investments in climate-smart solutions, we brought together investors and representatives of their portfolio companies to share about their investment journeys.

The Investor’s Imperative for a Green Future

Managing climate risk across portfolios is no longer merely just “good to have” but is essential to systemically tackle the climate crisis. With the majority of Southeast Asia’s population close to low lying coastal areas, they are prone to climate risks such as sea level rise and storms. Many of these populations are also highly dependent on industries such as agriculture, forestry and natural resources which can be negatively affected by anthropogenic climate change. This is why it is good practice to take into account risks imposed by climate change in investment portfolios and invest in technology-driven and climate-smart solutions.

Take for example Omnivore, a venture capital firm in India. Upon recognising that food and agricultural storage and wastage in India has become a systemic problem, the venture capitalist decided to invest in ECOZEN. ECOZEN was highly appealing to the team at Omnivore because it not only decentralises cold chains to better preserve agricultural products where the storage costs are lowest, but its climate-smart solution also helps to save water and fossil fuel by using renewable energy.

Over in Myanmar, which has one of Southeast Asia’s lowest electrification rates, rural communities are often left without lighting and have to turn to kerosene lamps to provide them with light at night. These lamps, however, provide little illumination and are harmful to respiratory systems when kerosene fumes are inhaled. In addition, the poor illumination provided by kerosene lamps limits the ability for rural communities to break out of the poverty cycle and to seek emergency health care services at night[1]. This led to Insitor Impact Asia Fund investing in SolarHome to fill this gap in the market by providing affordable, climate-friendly and solar powered lighting and charging to off-grid households.

What Investors Want: Alignment with the Sustainable Development Goals (SDGs) and Tangible Results

The stronger way innovators can establish the link between their solutions and the SDGs, the more efficient the way investors can measure and report on the impact of their investments.

Openspace Ventures explains importance of aligning businesses with SDGs

Jaclyn Seow, Vice President of ESG & Impact of Openspace Ventures, talks about the alignment of Sensorflow’s business model and voluntary commitments with the SDGs

Openspace Ventures tracks collective impact across its portfolio. As one of its investee companies, Sensorflow has demonstrated the potential to create high, measurable and sustained impact for its clients across multiple SDGs, including SDGs 11 and 13. Mapping one’s business activities to SDG priorities is useful for companies looking to establish metrics to assess and monitor their impact. It is worth noting that activities geared towards climate action often also address priorities under other SDGs.

C4D Partners highlights multi-dimensional impact that investee had on communities

Kathryn Durando, Investment Manager at C4D Partners, highlights the multi-dimensional impact that its investee, Saahas Zero Waste (SZW), has had on communities and the environment

Aligning business strategies with SDGs provides portfolio companies with the opportunity to measure the net impact of their business and communicate it to potential funders. For Saahas Zero Waste (SZW), they could pursue measurable impact goals, while funders could better understand the influence that their funding can provide. Through their work in converting waste into resources, supporting the circular economy and integrating informal workers into mainstream waste management systems in India, SZW had mapped their business to meet six of the SDGs. It also turned  net profit positive in the FY 2019-20 and this signals to their investor, C4D Partners, that their strategic partnership with and support to SZW will likely pay off as SZW continues to scale up.

Forging through Challenges Together

Investing in climate-smart companies does not come without its own set of challenges and setbacks. For companies to truly see long term results, however, it is often vital for funders to continue supporting them.

When Omnivore reflected on their needs, they shared that agritech and climate solutions aren’t focus areas for many investors in India. This created difficulties in finding co-investors for such nascent industries and engaging with the government. Nonetheless, Jinesh Shah, Managing Partner and Co-founder of Omnivore, remains optimistic about the future of agritech and climate solutions. One of the silver linings from  the COVID-19 pandemic was a greater awareness of how important flexible and sustainable supply chains are. For ECOZEN, the disruptions from the pandemic did not affect them as severely as their counterparts as their flexible storage arrangements could prolong the life of their farmers’ products.

Investors believe that these portfolio companies are likely to continue growing as they help solve fundamental sustainability issues in the world, particularly in the light of the pandemic. At the same time, companies also need to understand what investors are looking for to gain the support and funding needed to scale their solutions.

If you have not had the chance, watch the full recording to hear from AVPN members and their portfolio companies to gain a better understanding of the driving force behind investments into climate solutions.


[1] Eco-Business, 2019. Power to the people: How light after dark is dimming poverty https://www.eco-business.com/news/power-to-the-people-how-light-after-dark-is-dimming-poverty/

References

A. Environmental Stewardship
To protect the environment, we organize programmes like mangrove nursery and Reforestation, Coastal and River Clean-Up, Community Based Environmental Solid Waste Management, Environmental IEC Campaign and Eco-Academy

B. Food Security and Sustainable Livelihood
To ensure a sustainable livelihood for the community, eco-tourism include Buhatan River Cruise Visitor Center Buhatan River Mangrove Boardwalk are run by the community. Others include Organic Vegetable and Root crops Farming, Vegetable and Root crops Chips and by-products Processing and establishing a Zero waste store.

C. Empowered Communities
To empower the community, we provide product and Agri-Enterprise Development Training, Immersion and Learnings Exchange Program, Earth Warrior Training and Community Based Social Entrepreneurship Training

Author

Ernest Heng

Ernest is a final year Environmental Studies undergraduate at the National University of Singapore and is currently interning with AVPN’s Climate Action Platform team. In school, he spends his time learning about the various facets of the environment while completing a minor in Economics. After graduation, Ernest hopes to pursue Sustainable Development and Conservation as a career.

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