India's Clean Energy Transition Story

Even as VC and PE funds pump in money into esg activities of start-ups as well as legacy companies, they find the s’ and ‘g elements missing in India’s clean energy transition story

- Prerna Lidhoo

WITH SUSTAINABILITY TAKING centre stage in an enterprise’s strategic and operating environment, ESG short for environmental, social and governance) has become quite the buzzword in corporate circles, both Indian as well as global. The past few years have seen a ballooning of ESG-focussed funds—including both private equity PE) and venture capital VC) funds—in India. Per a report from Bain Co., assets under management AUM) by ESG-focussed PE funds in India more than doubled to 650 million in 2021. Another report from Bain says the AUM of these PE funds is expected to grow 90 per cent in the next five years, up from 39 per cent in the past five years. For start-ups, data from analytics firm Entrackr shows that of the top 25 early-stage deals from January-June this year, six were environment-related.

Typically, an ESG fund shortlists companies that score high on ESG parameters, and then looks at factors like financial viability of its product and the profit it is likely to give, before making an investment. Of course, every fund has its own investment strategy. As an ESG-focussed fund, we’re able to bring more value to our companies,” says Shailesh Vickram Singh, Founder of Climate Angels, a VC fund focussed on start-ups working in clean’ areas of energy, mobility, water, food and cities. A majority of PE/VC] funds today will have some funds with an ESG and climate focus. Right now, there are a lot of start-ups, but we’ll see a lot more corporates coming in.”