UK institution with $8bn portfolio invests in climate action fund targeting India
British International Investment (BII) $25 million investment in a private equity fund that targets mainly India for climate finance is another step towards fulfiling its goal of investing up to $1 billion in climate-related projects in the country by 2026.
The UK’s development finance institution and impact investor recently announced its commitment to the GEF South Asia Growth Fund III’s first close.
The announcement was part of six climate finance commitments made by BII at the ongoing UN climate change conference, known as COP28, in Dubai.
The commitment to the GEF fund accounts for 45% of the $55 million commitments made across six projects.
MORE CLIMATE ACTION
"The fight against the climate emergency does not recognise national borders – it is a global challenge and BII’s ambition is to continue to play a key role in developing India’s renewable energy and electric vehicle sectors as well as supporting technology-backed start-ups that have the potential to make a big difference in reducing emissions and building a more climate-resilient economy,” a BII spokesperson told AsianInvestor.
“In India, BII invested over $300 million in climate finance last year including investments in renewable energy, electric mobility and sustainable agriculture,” the spokesperson added.
India’s renewables sector, in particular, has proven very attractive to several global pension and sovereign wealth funds, such as Abu Dhabi Investment Authority and Canadian Pension Plan Investment Board, in the past few years.
BNP Paribas AM
“We see opportunities in renewable energy & their associated value chain in India; the power developers, the grid operators, domestic manufacturers of components, dedicated financing entities – some of them have emerged over the last decade and now have a demonstrable track record in implementation of projects,” Xuan Sheng Ou Yong, ESG analyst at BNP Paribas Asset Management told AsianInvestor.
“Some of them also have secured strategic investors in the form of sovereign wealth funds, pension funds, aligned companies from around the world.”
The government in India has set a target to meet 50% of its electricity requirements from renewable energy sources by 2030 and to reach net zero emissions by 2070.
About $160 billion per year is needed until 2030 to achieve these goals, according to some estimates.
While valuations will always be a topic of discussion, fundamentally, "there are opportunities for investors in the renewables value chain in India,” said Ou Yong.
“This is also supported with increasing ambition by the Modi administration around renewable energy deployment in India.”
FOCUS OF INVESTING
The GEF fund’s climate finance strategy focuses on investing in three areas: adaptation, mitigation and circular economy.
“We think adaptation technologies to increasing heat and humidity in India will present important opportunities in the future – adaptation at the household level (for example, efficient cooling systems), adaptation in agriculture (for example, crops more resistant to heat),” said BNP Paribas AM’s Ou Yong.
The GEF fund investment aligns with BII's sustainability impact goals, including supporting nascent climate sectors like e-mobility, food and water security and waste recovery, the BII spokesperson added.
GEF South Asia Growth Fund III follows the predecessor fund, GEF South Asia Growth Fund II, in which BII also committed $25 million.
The fund is managed by sustainability-focused private equity firm GEF Capital Partners based in India.
BII has a five-year rolling target to make 30% of its new commitments to climate finance during its current strategy period of 2022 to 2026.
The UK institutional investor had an $8.2 billion portfolio at the end of 2022, with investments in Africa, Asia and the Caribbean. Its single-biggest investment destination is India.
The UK institution had direct and indirect investments in more than 1,400 businesses at the end of 2022 – including 768 in Africa and 601 in targeted countries in Asia.