Largest approval by GCF to a single-country equity fund for a private sector climate mitigation program
By Anyway Yotamu in Harare.
The Board of the world’s biggest climate funder , Green Climate Fund (GCF) last week has approved Dutch development bank FMO’s proposal to accelerate private and public sector investment in India’s green infrastructure projects.
Through the Green Growth Equity Fund (GGEF), managed by EverSource Capital, the Dutch development bank will invest US$137millionl in the energy value chain, water, waste and transport sectors that promote low carbon and climate-resilient initiatives in line with India’s climate objectives and Sustainable Development Goals.
The project is FMO’s second collaboration with the GCF, following the US$100million that the GCF invested in Climate Investor One in 2019.
India faces major climate change challenges largely due to greenhouse gas (GHG) emission-induced warming. The country faces increasingly extreme weather events and natural hazards, putting pressure on critical natural resources such as water, while damaging infrastructure and threatening the livelihoods of its population.
There is a clear need for far-reaching mitigation and adaptation measures, since GHG emissions in India are the third-largest in the world, contributing to 7% of global emissions and temperature rise.
The total investment needs to ensure low-carbon and climate-resilient pathways for India is estimated at US$2.5 trillion over 2016-2030. An upcoming study by Climate Policy Initiative (CPI) finds that India is mobilizing less than 25% of the investment needed to reach this target (CPI, 2020). These mitigation and adaptation gaps are especially evident in the infrastructure sector, with the government facing budgetary constraints and limited capacity to structure and deliver green infrastructure projects.
That is why the EverSource Capital managed GGEF targets raising equity capital up to US$940million for India’s green infrastructure sectors such as renewable energy, transport, resource efficiency and energy services. The program is innovatively structured, blending concessional equity and grant capital to mobilize significant amounts of commercial equity to accelerate investments in these sectors, while providing the necessary US$4.5 million in technical assistance support to create an enabling environment.
By investing across the energy sector value chain, transport and waste sectors, the program reduces GHG emissions and increases access to alternative water resources in India through investments into wastewater treatment and desalination plants. The total emission reduction expected from the equity investment of the program is the equivalent of 166 million tons of CO2, while treating and generating an additional 5,700 million cubic meters of water from alternative resources for use by households, farmers and businesses.
Linda Broekhuizen, CEO ad interim at FMO says, “We are excited to announce our second GCF project, with such a substantial contribution to sustainable development goals, across economic, environmental and social dimensions. Apart from contributing to India’s climate goals, GGEF contributes to job creation and increased economic activity. This stimulus is particularly timely now, in a covid19 pandemic environment, which is threatening India with the economic slowdown, job losses and negative implications for businesses,” she said.
Tony Clamp, Director, a.i. of the Private Sector Facility at the Green Climate Fund said,“GCF is delighted to be partnering with FMO and other international investors to provide critical risk capital for this key strategic climate fund in India. The GGEF will make much needed investments across the energy, e-mobility, water and waste sectors to help drive India’s climate ambitions.”
EverSource Capital CEO, Dhanpal Jhaveri said,“We are delighted to receive GCF Board approval for an investment in GGEF. This is the largest single country amount approved by GCF ever for a private sector equity fund focused on climate mitigation. This investment commitment strengthens our resolve and ability to work towards supporting India’s climate objectives and Sustainable Development Goals along with creating impact and value in India’s clean energy ecosystem.”
The Green Climate Fund (GCF) is the world’s largest dedicated climate fund. GCF’s mandate is to foster a paradigm shift towards low emission, climate resilient development pathways in developing countries. GCF has a portfolio of over US$8 billion (over US$30 billion including co-financing) delivering transformative climate action in more than 100 countries. It also has a readiness support programme that builds capacity and helps countries develop long-term plans to fight climate change. GCF is an operating entity of the financial mechanism of the United Nations Framework Convention on Climate Change (UNFCCC) and serves the 2015 Paris Agreement, supporting the goal of keeping average global temperature rise well below 2 degrees Celsius.
EverSource Capital is the fund manager of the Green Growth Equity Fund (GGEF). It provides global investors an opportunity to invest in the Indian green infrastructure, alongside a global industrial leader and established regional fund manager. EverSource Capital brings together India’s leading private equity investor, Everstone Capital, and a world-leading solar energy developer and manager, Lightsource bp, for a unique and complementary 50:50 partnership. GGEF’s investment portfolio includes a utility-scale renewable energy platform Ayana Renewable Power; a distributed renewable energy platform focused on developing, owning and operating assets for residential, commercial and industrial customers called Radiance Renewables; an e-mobility focused platform called GreenCell mobility, which aims to become the largest pan-India e-MaaS (e-mobility as a service) company in India; and EverEnviro, which is envisioned to become India’s leading integrated waste management platform.