Asian Development Bank Backs 3 VC Funds With $60M

The Asian Development Bank will invest $60 million to help set up three venture funds dedicated to new climate change technologies, the bank announced Monday. The funds will primarily target companies in China and India. ADB is injecting $20 million each into the three funds: Aloe Environment Fund III, Keytone Ventures II, and VenturEast Life Fund III.

The Asian Development Bank (ADB) is investing $60 million to help set up three venture capital funds dedicated to nurturing new climate change technologies. The funds will primarily target the markets of the People’s Republic of China (PRC) and India, which are actively promoting clean energy and sustainable technologies.

“Climate change will hit Asia hard in coming decades. Investing in these venture capital funds will help channel finance into innovative and affordable technologies that tackle the challenge of climate change in ways that are suited to developing Asia,” said Philip Erquiaga, Director General of ADB’s Private Sector Operations Department.

ADB is injecting $20 million each into the three funds – Aloe Environment Fund III, Keytone Ventures II, and VenturEast Life Fund III – that should leverage an additional $600 million-$700 million private sector investment into the funds. The funds will, in turn, invest in early-stage technology companies that address climate change mitigation and adaptation or environmental protection, also known as climatech. Early-stage companies are new firms which have not yet reached annual profitability.

Mitigation costs in developing countries are predicted to grow to over $100 billion per year by 2030, depending on the scale of long-term greenhouse gas emission reduction targets. Adaptation cost estimates for Asia and the Pacific are in the order of $40 billion per year between now and 2050. The 2007 Bali Action Plan, the Copenhagen Accord, and subsequent climate change agreements have all identified technology innovation and transfer as key to tackling climate change. However, companies working in these areas have often struggled to access sufficient private capital to get off the ground.

ADB is integrating climate change components into its planning and investments in developing Asia. It has, for example, invested $4.8 billion into clean energy projects in the past 3 years alone – including via private equity funds.

“As well as investing in more mature projects and technologies, it’s also critical to ensure that private sector money is available at a very early stage to develop low-carbon technologies,” said Robert van Zwieten, Director in the Private Sector Operations Department.

Aloe Fund is targeting a total fund size of €200 million-€300 million and will be managed by Aloe Private Equity. It will invest in Asian companies whose technologies can be used in the PRC, India and, potentially, countries in Southeast Asia with a particular emphasis on transferring technology and know-how. It will aim to make 8-10 investments of around €20 million each.

Keytone Fund will be managed by Keytone Capital Partners II. Its $200 million fund will be focused largely on climatech firms in sectors such as light-emitting diodes, industrial energy efficiency, electric vehicle and power batteries, and waste treatment. It will make around 15 investments of $10 million-$15 million each.

VenturEast Fund is expected to invest a total of $200 million into companies in the Indian market that seek to apply proven technologies from other regions. Its climatech investments will be divided between healthcare, sustainable agriculture, and clean environment technologies. It will make minority investments of $5 million-$15 million in 15-18 companies. VenturEast Mauritius Investment Advisors will manage the fund.