India needs more investment in climate-tech, sustainability

Anjali Bansal, founding partner of Avaana Capital, started the venture capital fund with a view to take exciting innovation in the technology ecosystem, apply it to large-scale problems, and create outsized returns – both financial as well as developmental. Avaana’s focus is on investments in climate mitigation as well as adaptation and resilience. Environmental, social, and governance is not a separate category of funding, rather increasingly becoming a filtration criteria, she says.

India needs more investment in climate-tech, sustainability
Anjali Bansal, founding partner of Avaana Capital

Financial Express: What about funding in the Indian climate tech space – how do you view it right now? Is there some amount of greenwashing, tick-boxing – or can we genuinely be positive about the space?

Anjali Bansal: India’s climate-tech landscape is seeing tremendous momentum, on the back of exceptional entrepreneurial activity, supportive policy and increasing interest from investors. As nearly 20% of the world’s population resides here, India is crucial for global sustainability, and we are seeing climate solutions built from India for the world.

In India, climate-tech attracted $1.2Bn in investments between 2016 and 2020, with most investments focused on renewable energy and electric mobility. Against this, the sector raised $839 million in the first two quarters of 2022 alone, signifying the exponential increase in funding activity. Investments are flowing into emerging climate solutions as well, such as waste management, circularity, climate-smart agriculture, carbon and energy efficiency. For eg. FarMart, which is helping decarbonise agricultural value chains through digitization, has raised $32 million, while Ninety One, which has engineered high-quality sustainable mobility alternatives, has raised $30 million. Companies like EekiFoods, solving for food security, and, solving for climate-skilled talent and jobs, are also scaling rapidly. 
FE: What are the technologies that you believe are both “cool” and critical to fund in 2023 and beyond?

AB: At Avaana, we invest in three sectors that form over 90% of emissions, and hence are critical for net zero – namely energy and resource management, mobility and supply chains, and climate-resilient agriculture. In energy transition especially, we are excited about innovation taking place in energy storage, smart grid technology, improving energy efficiency of devices and buildings, as well as green hydrogen, which has now received tremendous impetus under the National Green Hydrogen Mission.

Digitisation and industry 4.0 technology will help decarbonise supply chains through process efficiencies, while emerging alternative materials can accelerate replacement of high-carbon intensity materials. We expect the coming cycle of agri-tech innovation to focus on food security, through innovations in climate-smart agriculture from sowing to waste reduction.

FE: Climate tech has a longer time horizon, and this can be a tough sell for investors, especially those who are used to the quick gratification of many IT investments. Your views.

AB: Climate is no longer a “social good”, rather it is a business imperative. Consequently, it is emerging as a strong asset class and investment opportunity. Climate-tech will require funding across different kinds of capital – ranging from equity and debt as well as blended finance and grant capital. Equity investors must recognise that while it is patient capital, it need not be philanthropic capital – there is a large return opportunity in investing in climate-tech.
Avaana’s vision is to support future market leaders leveraging technology and innovation to catalyse climate solutions and sustainability, while delivering exponential returns.

FE: Is Environmental, social, and governance (ESG) funding in India still at a nascent stage?

AB: Most investors are now looking at incorporating some form of ESG metrics as part of their decision-making matrix – driven partially by limited partnership (LP) interest as well. I would say ESG is not a separate category of funding, rather increasingly becoming a filtration criteria. 

FE: Do you shortlist startups that score high on ESG parameters?
AB: Given our investment mandate, the companies we invest in are actually solving for environment and social (E and S). We look for founder intent on integrity, and good governance (G) has to be table-stakes, no matter the size of the company. We emphasize good corporate governance practice from day one, and only invest in companies solving for climate solutions and sustainability.

FE: Do you think India should enact more regulations regarding ESG and sustainability? 

AB: India’s policy regime has been highly supportive of sustainability – whether it is the PM’s Panchamrita vision, BRSR Reporting instituted by SEBI, or subsidies available for EVs. Continued regulatory support will certainly help accelerate investments into climate-tech, cement India’s position as a global climate leader, and hence catapult the transition towards a green future. 

FE: In your view, how are women investors redefining the climate tech landscape in India?
AB: At Avaana, we are a leadership team comprising 3 women, and we have all had our respective unique journeys leading us to climate. Swapna Gupta, my Partner, has closely seen India’s deep-tech ecosystem solve for issues in supply chains and mobility as a corporate VC. Shruti Srivastava, our Investment director, has invested extensively at the confluence of technology and sustainability. I myself have spent decades across industries and functions, looking for big problem statements, and advancing tech-led solutions. What unites us is a passion for technology, and its ability to drive large-scale outcomes. We value diverse perspectives and invest in great founders, irrespective of their background. Coincidentally, 40% of our portfolio has a woman co-founder, while 65% of our portfolio operates in Tier 2+ India. We are excited to welcome diverse voices to lead the charge for climate-tech in India. 

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First published on: 01-02-2023 at 14:01 IST