Can companies that are into sustainable development sustain the testing times of a slow economy? A close glimpse at ‘green investing’ i.e. investing in environmentally responsible companies can provide a more accurate answer.
Heads of industry bodies, banks, venture capital financing companies and investment advisors are all commenting on green investing which has lately been gaining prominence in India. They share one view on green investing -that it is no longer a choice between “Save your money” or “Save the trees”. The green space may well become a ‘greener pasture’ for entrepreneurs.
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| The whole idea of going green has caught on with more and more Indian corporates. No wonder, many companies have put environment management systems in place and are trying proactively to be green. Hemant Rustagi |
But before we weigh the ‘gold’ in green, let’s begin with an overview of the broad green landscape. Green investing pans across players in renewable energy sectors including wind, solar, hydro power, bio-fuels, biomass, rural energy technologies, waste management, new energy technologies (chemical fuel cells, hydrogen energy, ocean energy, etc.), consumer durables such as energy efficient home appliances, green construction and industrial products (like water treatment, air pollution control equipment). The green market size and opportunities are promising, says a recent Merrill Lynch and Capgemini report, which attributes its robust growth to the world community’s increased attentiveness to environmental concerns, such as global warming and climate change. Emerging markets attract less than 1% of the US$ 3.7 trillion managed by the criteria of responsible investing.
There is more encouraging news for environment-friendly entrepreneurs. Green entrepreneurs can now pitch for investments through the Green Investor’s Network. Launched by New Ventures India, this is a joint initiative of the CII- Sohrabji Godrej Green Business Centre in Hyderabad and the World Resources institute in Washington DC. According to Sr. Director and Head-CII-Sohrabji Godrej Green Business Centre, S. Raghupathy, the Green Investor Network is “an initiative to create a community of investors, focused on investing in clean technology and clean energy sector. We facilitate investments in unlisted small and medium enterprises in the clean technology and clean energy sector. At the moment we have 8 members in our network with commitments from many more venture capitalists and banks”.
The New Ventures India program has successfully facilitated investments in eight green companies to the tune of US$ 18.6 billion (Rs. 73 crores) in the form of equity and debt. From an investor’s standpoint, Raghupathy is convinced that “green makes good business sense as clean technology and clean energy sector in India is growing very fast. Under the New Ventures India program we have been working with more than 200 enterprises in the green sector since 2006. We have screened and identified the most innovative and promising 21 companies since the past two years. The major investments were made by venture capital funds, a clear sign of the shifting focus of investors from information technology, telecom, realty etc to Green.” Viewing the road ahead, Raghupathy sees a large opportunity for green entrepreneurs as this strong investor network has the potential of attracting huge investments in the near future.
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One of those large investors that Raghupathy refers to is Manoj Gupta of Nexus India Capital. A leading venture capital financing company, Nexus has invested in a solar powered portable LED lights company, Dlight, and an organic farming company. Gupta draws a parallel between the telecom and energy industries as he explains, “In India, we see a similar revolution as telecom (enabled by mobile phones) in the energy space, enabled by renewable energy sources. Energy is a huge problem in India. We consume only one-fourth of world’s average per capita power consumption. Greenhouse gas emissions coming from power generation is harmful for everybody and for sustainable development of any society it is important we adopt green technologies.” Having actively invested in clean energy companies at a very early stage, Gupta continues to bet big on clean energy and doesn’t mince words when he says, “CleanTech is one of the sectors where companies should use this recession time to build long term value and not worry about short term losses and gains. India’s energy problem is a fundamental problem, which cleantech alternatives can address if they are made “cheaptech”. India can be a launching pad for “cheaptech” solutions in a CleanTech global scenario. Entrepreneurs will fail in India if they play by CleanTech hype in the western world. If currently CleanTech is version “1.0” in western world, we should look at in India version “0.1” opportunities (technologies addressing fundamental problems) or version “2.0” opportunities (leapfrog technologies like happened in telecom using mobile) because problems in India are different than western world”. Gupta has started a CleanTech Special Interest Group in Mumbai with The Indus Entrepreneurs (TiE).
These data points further substantiate the future potential of the green market. According to Clean Edge, the US-based green technology consultant, the four clean-energy technologies of bio-fuels, wind power, solar energy and fuel cells were worth US$ 40 billion in 2005. They estimate the industry to grow to US$ 167 billion by 2015. In India currently, 11,000 MW of power is being produced from renewable sources. During the 11th Five Year Plan, the Plan panel is targeting 15,000 MW of capacity addition. According to estimates, renewable sources contribute only 7.7% of the country’s total power generation, as against the world average of 13%. This leaves scope for massive growth of the solar and wind energy sectors (a renewable energy SEZ is also in the offing). India is the fourth largest ethanol producer globally after Brazil, the US and China, with its average annual ethanol output touching 1,500 million litres. For a 5% ethanol blend in petrol nationally, the ethanol required is 550-640 million litres annually. The sugar industry wants the government to also approve ethanol blending with diesel and if that happens, the demand for ethanol will quadruple.
Hemant Rustagi, CEO of WiseInvest Advisors, an investment advisory firm based in Mumbai analyses this as, “The whole idea of going green has caught on with more and more Indian corporates. No wonder, many companies have put environment management systems in place and are trying proactively to be green. Besides, tough environmental regulations, growing preference among consumers for eco friendly companies and inherent cost benefits are some of the other reasons that have prompted many companies to strive for a balance in economic, environmental and social impact on their businesses”.
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