Northern Arc, a non-banking financial company in India, on Thursday said its maiden climate fund has secured $65 million in debt commitments from the United States International Development Finance Corporation (DFC) and OeEB, the official Development Bank of the Republic of Austria.
While DFC has committed $50 million, OeEB will invest $15 million in the fund.
Northern Arc manages assets under management (AUM) of Rs 15,121 crore through its balance sheet and active AIF funds as of September 30, 2024. The firm is backed by Sumitomo Mitsui Banking Corporation, LeapFrog, 360 ONE (formerly known as IIFL), Accion, Augusta Investments (known as Affirma Capital), Dvara Trust, and Eight Roads (a proprietary arm of Fidelity).
Northern Arc’s climate fund will extend debt financing to growth-stage companies operating in commercial, industrial, and residential solar energy, energy efficiency, green buildings and materials, e-mobility, and sustainable agriculture.
“For net zero to become a reality, there is a need to fund climate-focused SMEs to promote sustainable practices at the grassroots level. However, the SMEs often struggle to access sufficient growth funding, highlighting the need for tailored underwriting approaches considering their unique value propositions and financing needs.” Bhavdeep Bhatt, CEO, Northern Arc Investment Managers, said in a statement.
“As climate change intensifies, the urgency to channel more capital toward these climate-driven enterprises becomes even more critical. Our maiden climate fund is uniquely positioned to bridge this gap,” Bhatt added.
With India targeting net-zero emissions by 2070, investors are increasingly tapping opportunities in the climatetech sector and are preparing substantial capital pools for green energy initiatives.
Apart from Northern Arc, active investors in India’s climate tech space include Avaana Capital Blue Ashva, Speciale Invest, Omnivore, Climate Seeds Fund, Asha Ventures, Transition VC, Climate Angels, EverSource Capital and Avaana Capital. On the LP [limited partners] side, British International Investment is also actively scouting for climate finance opportunities in the country.
The capital that LPs have committed to climate-focused fund managers over the past two years has witnessed a sudden spike, compared to the previous years, show data available with research firm Venture Intelligence.
As many as 13 climate-focused funds raised $719 million in 2023, while another six funds raised a record $989 million in 2022. In the previous year, when awareness was relatively lower, only two climate funds garnered commitments, cumulatively worth $90 million; while in 2020, one climate-tech fund raised a meagre $31 million.
