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Clean Energy Push: ADB Puts $60M In 3 VC Funds

23 May, 2011

In a bid to promote clean energy and focus upon climate change issues, the Asian Development Bank (ADB) is investing $60 million in three venture capital funds, developing climate-change technology in China and India, the Manila-based lender said in an e-mailed statement today.

The multilateral lending agency will put in $20 million each into Aloe Environment Fund III, Keytone Ventures II and VenturEast Life Fund III, which are likely to leverage another $600-$700 million of private sector investment. The funds will provide financial assistance to new technology companies focused on climate change mitigation and adaptation or environment protection. Aloe Fund is targeting to raise as much as €300 million ($420 million) and plans to make eight to 10 investments of about €20 million each, the ADB said.

The $200 million Keytone Fund will focus on technologies for light-emitting diodes, industrial energy efficiency, electric vehicle and power batteries, and will make around 15 investments of $10 million to $15 million each. VenturEast Fund may invest $200 million in India, making minority investments of $5 million to $15 million in 15 to 18 companies, according to the ADB.

While mitigation costs in developing countries are estimated to reach $100 billion-plus per year by 2030, depending on the long-term targets to reduce greenhouse gas emission, adaptation costs for the Asia-Pacific region are expected to reach $40 billion per year between now and 2050.

Although the Bali Action Plan, the Copenhagen Accord and all other subsequent climate change agreements have identified technology innovation and transfer as the key to combat climate change issues, companies working in these areas often struggle to access sufficient private capital to get started, ADB had stated.

“Climate change will hit Asia hard in the coming decades. Investing in these venture capital funds will help channel finance into innovative and affordable technologies that tackle the challenge of climate change in ways that are suited to developing Asia,” Philip Erquiaga, Director General of ADB’s private sector operations department, said in a release.

ADB has been consistently scaling up its investments in clean energy in emerging markets. In 2010, it put $40 million in two India-focused funds investing in the clean energy space. It put $20 million each in Clean Resources Asia Growth Fund (managed by CLSA Capital Partners) and the Renewable Energy Asia Fund (managed by Berkeley Energy), both of which have India as one of their primary target markets. CLSA’s Clean Resources Asia Growth Fund targets private equity investments in clean energy technology companies focused on Asia, mainly in China and India. Renewable Energy Asia Fund backs renewable energy projects in India, the Philippines and other South-East Asian countries.

Clean tech as a theme is attracting the interest of institutional investors. Clean technology investing in India is largely centred around clean energy. Recently, South Asia Clean Energy Fund, floated by GEF in partnership with Yes Bank, raised $2 million from Sarona Asset Management which targets financial returns in frontier markets with a mandate to support communities and environment. ADB said it had invested $4.8 billion in clean energy projects in the past three years.

There are several clean energy funds which are presently active, as countries like India face greater environmental challenge and also offer attractive investment opportunities in waste management, water treatment, energy efficiency, industrial equipment and renewable energy (such as wind, solar, biomass and hydel power).  Olympus Capital Asia Holdings, a mid-market private equity firm with a $250 million regional environmental fund that recently set up its shop, has been very active as well. Also, a host of other specialist or pure-play cleantech funds are targeting the huge opportunity in the Indian alternative energy space, beset with power supply deficit, an increasing need for energy security and rising environmental concerns.

Climate Change Capital Ltd, a UK-based investment banking group which raised a fund worth $830 million in one of the world’s largest private sector carbon fund to invest into developing economies of India, China and South-East Asia, is looking to invest in carbon-embedded assets and buy carbon credits in projects. Also, BTS Investment Advisors, focused on small and medium enterprises, is planning to raise a new fund focused on clean energy.


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Clean Energy Push: ADB Puts $60M In 3 VC Funds

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