The Brief | September 15, 2022

The Brief: India’s climate investing tipping point, profitable smallholder farms, Ethic’s growth round, green exchange, carbon-free crypto

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Greetings, Agents of Impact! 

Featured: Impact in India

Overheard at India’s ‘Impact 2022’: Climate investing tipping point. India’s Prime Minister Narendra Modi promised at COP26 last year to meet half of the country’s energy requirements with renewable energy by 2030 and to reach net zero by 2070. The pledge is spurring a surge in climate investment and innovation, reports ImpactAlpha correspondent Shefali Anand from Delhi. Seventy climate-focused startups in India raised $839 million in the first half of the year, according to India’s Impact Investors Council, which held its annual meeting this week. Many companies in India are making sustainability core to their operations and supply chains. “It’s a tipping point,” Aakash Shah of Peak Sustainability Ventures told the assembled investors. Shah’s firm counted nearly 1,800 climate deals over the past 14 months; more incubators, entrepreneurs and investors in India are talking about climate solutions.

  • Follow the money. Climate finance in India reached $20 billion in equity, green bonds and other types of capital in 2021. Capital is flowing into renewable energy projects and electric vehicles. TPG Rise Climate co-led a $1 billion investment in a new EV unit of India’s Tata Motors last year. Most of India’s climate tech remains early-stage. In a survey by Unitus Capital and climate tech accelerator Climake, nearly three-quarters of India’s climate investors said they were interested in pilot and early-stage investments. Mainstream investors’ interest in scaling climate solutions could be good news for a market that requires at least $1 trillion in additional climate capital by 2030. State the authors: “Private investment is crucial to meeting India’s climate goals.” Learn more.
  • Private follows public. India’s government has pushed a swath of programs supporting renewable energy and electric mobility. Private capital is following. “Capital goes where entrepreneurs are going, and increasingly entrepreneurs are veering towards climate,” Riddhi Vora of Avaana Climate and Sustainability Fund said.
  • Innovation advantage. India has the world’s third-largest startup ecosystem after the U.S. and China, and investors are betting it can “leapfrog” in climate technology. The relatively low cost of experimenting with new technologies in India has made the country a hotbed of innovation, said Satya Narayan Bansal of Blue Ashva Capital, a fund based in India and Singapore.
  • Keep reading, “Overheard at India’s ‘Impact 2022’: Climate tipping point,” by Shefali Anand on ImpactAlpha.

Dealflow: Agrifood Investing

Sahyadri Farms raises nearly $40 million to digitalize India’s smallholder farmers. Sahyadri Farms is a farmer-led fruit and vegetable processing and export business that works with more than 18,000 farmers in India managing 31,000 acres and nine crops. Sahyadri Farms’ digital platform provides farmers with information on farm inputs, sustainable farming practices and real-time climate and market conditions. Its latest funding round was backed by Dutch development bank FMO, Belgium’s Incofin and Korys, and French development finance institution Proparco. FMO’s Michael Jongeneel said the investment will help Sahyadri Farms reach more farmers and “set a blueprint for further growth in the industry.” Sahyadri Farms will use the capital to expand its processing capacity and set up a biomass plant to generate electricity from agri-processing waste.

  • Agtech ecosystem. India’s agtech sector is booming. Last month, impact investor Omnivore notched a big exit in the sector, selling its stake in aquaculture software firm Eruvaka to Nutreco. Also last month, Harvesting Farmer Network raised $4 million, and Produze scored $2.6 million. In July, Jai Kisan secured $50 million to provide credit to smallholder farmers. Earlier this year, Waycool received backing from Lightsmith Group.
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Prince Harry and Duchess Meghan Markle-backed Ethic raises $50 million growth investment. Tech-driven asset management platform Ethic helps institutional investors and financial advisors, such as Fidelity, Morgan Stanley and Charles Schwab, screen and built portfolios of “values-based” equities. Prince Harry and his wife Meghan Markle, Duchess of Sussex, joined the company as impact partners last year to help “educate and rally our impact community around the issues that matter most,” Ethic’s Jay Lipman told ImpactAlpha at the time. The New York-based company has now raised a Series C round to expand into new markets and products. Ethic says it has surpassed $2 billion in assets under management.

  • Impact fintech. Jordan Park Group led the round, with participation from existing investors Oak HC/FT, Urban Innovation Fund, Kapor Capital and others. UBS invested via its venture arm UBS Next. “Through our investment in Ethic, we aim to increase access to customizable, sustainable investment offerings to a much broader set of investors,” said UBS’s Mike Dargan.
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Dealflow overflow. Other investment news crossing our desks:

  • U.S.-based SER Capital Partners closed its first fund at $475 million and will invest in sustainability-focused middle-market businesses and infrastructure.
  • NeoCarbon in Berlin raised $1.3 million for its direct air capture kits that can be retrofitted in industrial cooling towers to catch carbon emissions.
  • Citi is ramping up its impact fund to $500 million. Since launching the fund in 2020, it has invested $100 million in 35 companies advancing financial inclusion, the future of work and climate resilience.
  • Green Exchange, a public benefit corp., seeks regulatory approval for an exchange for green investors and sustainability-minded companies.

Signals: Blockchain Energy Use

Ethereum transition points the way to a carbon-free blockchain. By the time you read this, energy consumption equivalent to that used annually by Chile and the carbon footprint of Hong Kong may have vanished into the… ether. That is, if all went well with the much-anticipated transition of the Ethereum blockchain from an energy-intensive proof-of-work, or PoW, system to a more eco-friendly proof-of-stake, or PoS system. Proof of stake relies on blockchain members “staking” their own crypto to validate new transactions, rather than requiring powerful computers to “mine” digital coins as PoW does. The “merge,” as the switchover is known, will slash electricity consumption by 99.95%, estimates the non-profit Unlike most efforts to drastically reduce energy consumption, this one will happen almost instantaneously. “The blockchain’s energy use will drop off a cliff,” Daniel Keller of decentralized cloud infrastructure provider Flux tells ImpactAlpha. “The moment the merge happens, the miners will be out,” he adds.

  • Questionable benefits. Many crypto proponents hope the merge will redeem the reputation of blockchains and cryptocurrencies as energy hogs. But it’s unclear how big the net benefit will be. According to Keller, many of the energy-intensive computer “rigs” that once verified Ethereum transactions under the PoW system will likely switch to mining other PoW currencies, such as Flux, ERGO, KASPA or Ravencoin. Others will simply be thrown away, creating massive e-waste. The move could even prompt developers who’ve built applications on Ethereum but are concerned about the security of the PoS to move to other more energy-hungry blockchains, Keller says.
  • ReFi. Ethereum is joining a host of other blockchains, such as Cardano, Avalanche and Solana, which already use the PoS system. Chia, a blockchain that underlies a new World Bank ledger to track high-quality carbon credits, uses an eco-friendly verification system called “proof of space and time.” (See “IFC partners with Aspiration in $10 million fund to lift quality of carbon credits.”) The merge is part of an ongoing trend to reduce the environmental impact of cryptocurrencies and the blockchain technology underlying them, as developers pursue a new genre of crypto-enabled regenerative finance, or “refi.” “This is a step toward blockchain ecosystems becoming net-zero” or even carbon-negative, says Thomas Morgan of
  • Keep reading, “Ethereum transition points the way to a carbon-free blockchain,” by Dan Keeler on ImpactAlpha.

Agents of Impact: Follow the Talent

BlackRock is hiring a sustainable investing research and strategy associate/vice president in New York… MSCI is looking for an ESG controversies specialist in Toronto… Bridgewater Associates seeks a program manager for sustainable investing in Westport, Conn… IMPACT Partners seeks an investment director in Copenhagen… Acumen is hiring a senior associate for impact in London… World Impact Foundation is looking for a part-time investment officer in Peru… McKinsey seeks a green finance consultant in Singapore… ECMC Foundation is recruiting a senior associate for its Education Innovation Ventures program in Los Angeles.

Thank you for your impact!

– Sept. 15, 2022