Sustainable Investing: Field To Foray

A sustainable investment is one that addresses current problems or challenges without jeopardising future needs. It all comes down to finding better ways to do business that will benefit corporations and citizens now and in the future

- Nitesh Kumar

CLIMATE TECHNOLOGY as an attractive asset class for pure-play venture capital (VC) investors, rather than impact funding or environmental, social and governance (ESG) investment targets, has only recently begun to gain traction. To meet its carbon-emissions targets, India will need funding and investment, much of it upfront. According to the McKinsey report, as much as 3.5-6 per cent of GDP will be required. Under the current Line of Sight scenario, $7.2 trillion in green investments are required in the years leading up to 2050. An additional $4.9 trillion would be required in an accelerated scenario.

In comparison, Indian climate tech companies received only $1 billion in venture capital funding between 2016 (when the Paris Agreement was signed) and 2021, according to a report by London & Partners and Dealroom.co. Ad hoc investments by impact funds, global foundations, and generalist VC firms account for the majority of climate tech investments in India.

The growing concern about climate change and its impact on society has spurred a new investment discourse. In the past, firms have done little or nothing to maintain the environment and promote social cohesion and diversity, but with increased demand from regulatory agencies and other public watchers, investors have started incorporating concerns about these issues.