A B Chakravarthy, India Country Director and Shruti Goel, Director of Impact Measurement & Management from Upaya Social Ventures discuss the organization’s approach to building a climate-aligned portfolio with a focus on dignified job creation while simultaneously exploring the intersections of climate change, poverty, gender, and impact investing in India.

Q1: As someone who works with an impact-first lens to achieve inclusive and sustainable impact on ground, could you share your approach and thesis when it comes to building a climate aligned portfolio?

At Upaya, we believe that Climate change and poverty are inextricably related—one cannot be fought without ending the other. Climate action is not just about carbon dioxide numbers and targets. Climate action is about people and actors in the real economy—workers with the right skills for a green economy, enterprises that can innovate and invest, and communities capable of diversifying their economies. The impacts of climate change like rising temperature, sea-level rise, intense droughts, heat waves, floods, wildfires, and other such extreme weather events directly affect jobs and livelihoods. We acknowledge that the underserved communities are also the most vulnerable to climate change and least equipped to handle adversities.

Creating dignified jobs for the poor remains our north star that guides our investment strategy and we are evolving our thinking to address the nexus of climate, poverty and gender with the ability of business models to create meaningful jobs.
To inform our approach to build a climate aligned portfolio we did an internal scan across our existing portfolio to understand which business models are avoiding harm to the environment and which are contributing to the solutions. While we are thrilled to share that half of the companies in our active portfolio are engaged in some form of climate action (adaptation, mitigation or resilient practices), what is also worrisome is that most of our investee companies are operating in areas that have high climate risks. We have profiled them individually and now intend to work with each one of them to work towards designing action plans together.

Secondly, we have identified more sectors and sub-sectors that are at the intersectionality of climate and dignified jobs. One such sector is food & agriculture where we are already working with companies like Bharat Rohan, Pasidi Panta and Bharat Krushi Seva which are helping the farmers in Climate Smart Farming through their various products and services. We will be identifying and investing in companies who can help small and marginal farmers overcome the ill-effects of climate change like poor soil health, low productivity etc.
Apart from this, we are building on our existing sectoral strengths. For example with existing four investments in waste management and circular economy we have gained good sector expertise. Similarly, our investments in Textiles, apparels and handicrafts are providing us rich insights into opportunities to contribute to climate action while continuing to create thousands of dignified jobs for the poor. With this experience, we see a large scope in these two sectors and are working to ramp-up more investments here in the near future. We are assessing existing frameworks for their usability to us in internalizing climate assessments at the pipeline stage.

Q2: Upaya has strongly endorsed and supported the concept of creating ‘dignified jobs’ through its investment portfolio. How do you see the themes of climate impact and dignified jobs creation align?

Could you share with our readers, a few examples of scalable business models or enterprises that are both aligned with this mission and aligned to climate action?

We will take an example of Greenworms, one of our investee companies that works in preventing and mitigating ocean plastic pollution by working across the coastal towns and villages of India. As a young company, they have grown phenomenally well creating dignified jobs for 2000+ women sanitation workers and an environmental impact of 39,000+ tonnes of plastic waste recovered. Not only dignified jobs at the intersectionality of climate but also gender which Upaya focusses on and invests in.

Another example is Resham Sutra, which sells its product called “Silky-Spin”, a Solar powered silk reeling machine that is an alternative to manual thigh reeling technique that women weavers use which creates wounds & drudgery during their work. With Silky Spin, women weavers overcome the drudgery involved and also they can reel when there is no stable electricity. This has helped women earn at least 2.5X higher than of the previous income. In the last 4 years, they have reached 350+ villages and sold over 20,000+ solar-powered weaving machines.

These are some examples from Upaya’s portfolio which are sustainable business models, scaling at a fast pace, creating dignified jobs at the intersectionality of climate and gender.

Q3: Upaya has strongly advocated the ‘recycled philanthropy’ model to generate investments through a pool of recoverable grants.

Could you share your thoughts on how such a model could be leveraged especially to scale up climate investments, especially given the urgent need for more patient capital in climate linked projects?

Recycled Philanthropy, a model pioneered by Upaya combines philanthropic funds into a pool of recoverable grants from which we invest in job-creating businesses in some of the most challenging sectors and geographies. It is a great model for providing high risk- patient capital but should not be mistaken for a silver bullet to solve all problems of scaling up climate investments. The trick lies in applying the model in strategically selected sub-sectors and business models where it can truly catalyse more impact capital.
There are enough statistics to say that the Indian start-up ecosystem has received a lot of investments and is growing manifold. But if we flip the question to ask, how much of it is available/ gone to support companies like Resham Sutra, Greenworms you would see an abysmal number. This is where you need patient capital where successful models have to be demonstrated first in some of the sectors and sub-sectors where a conventional venture investor would shy away. Take the example of Micro-finance. Micro-finance is where it is today because of philanthropy and patient capital which helped take early risks and build an eco-system to scale and return. Waste Management, Textiles & handicrafts are some of the industries that are ready to be invested in with such patient capital today.

We are better placed now to catalyze patient capital and grow some of the sub-sectors faster than microfinance did. First loss guarantee, Impact outcome driven incentives for companies that create climate mitigation/adaptation practices are some of the ways through which we could foster this.

One of the main challenges to enable outcome financing is measurement and validation of impact. At Upaya, we have invested in a dedicated impact practice team that independently measures impact and reports as per global reporting frameworks like the IMP and IRIS+. We are confident of the outcomes that our investments are generating today and that gives us more confidence in building up and designing impact linked financing models. We are open to collaborate with outcome financiers who are keen to work on this with us.

Q4: There is a clear need to achieve gender inclusiveness while investing for climate finance. Through your experience, what are those interventions that are required to build a gender lens investing under climate finance?

At Upaya, we have invested in 36 companies so far and have created 33,000+ dignified jobs for underserved communities in India. We have recently disaggregated the jobs for gender and found that 46% of our job holder base consists of women job holders. To achieve gender inclusiveness, while investing for climate finance, following are the areas that needs intervention:

(a) Building an evidence base from the Global South: the metrics around climate are still evolving and not standardized esp. w.r.to India. There is not enough data and information available in the public domain to say what is the impact that has been created on the community through various products and/or services created by these companies. Moreso, getting gender disaggregated data still remains a challenge. To strengthen gender lens investing under climate finance, evidence building and collaboration has to play the most vital role. For example, for the creation of Dignified jobs for the poor, Upaya has taken the first step by putting its own resources to use to collect, measure and understand the impact on job-holders. With over 12 years of practicing this, we saw that if all industry players can come together and collaborate then can solve for lack of evidence and data use for investment decision making. This led to the launch of the dignified jobs collaborative where peer investors have supported and joined the initiative to transparently enquire about job quality in the workforce with the help of 60 decibels lean methodology. Now, we have data and information that would talk about impact benchmarks across different industries. There is a scope to expand this further with bigger data sets. If more data and info is available, then confident and transparent reporting will pave the way for more patient and catalytic capital for enterprises creating quality jobs at scale for the underserved communities. This kind of collaborative evidence building should be applied to strengthening gender lens investing under climate finance.

(b) Developing credit profiles for women job holders: Lots of women job holders do not have credit profiles. Their only credit profile is engagement with our companies and earning through it. For example: If there is a Resham Sutra’s silk reeling machine, Raheja’s Solar dryer or SMV green e-rickshaws that has to be financed for women jobholders, there is no or low level of financing. How can you bring more funders for last mile financing of Distributed Renewable Energy Assets (DRE’s)?

(c) Identifying emerging sectors and sub-sectors that operate at the gender-climate nexus: Country’s economic landscape is changing with new and emerging sub-sectors as well as technologies. It is important to keep scanning for opportunities that have high job creation propensity for women, specially those for economically disadvantaged communities.

Q5: Coming to sector specifics, Upaya's portfolio includes enterprises addressing waste management challenges that squarely lie between climate impact and building livelihoods for vulnerable communities.

From your experience, how can more investments be inspired towards this sector which is otherwise perceived to be challenging?

What should be the investment approach towards supporting this sector?

Based on our learnings, we ask if the business model can create a) Strong differentiation over time (NOT TODAY). This does not always come from technology but by other means like creating strong moat in supply chains, brand, stakeholder relationships etc., b) Whether these businesses can deliver stable growth with financial sustainability, without being under pressure to grow exponentially. Upaya's core philosophy is to create ‘dignified jobs’. One of the important aspects of that is to create sustainable jobs that are long term, not Fly-by-night jobs.

This is one of the sectors where you can see companies who have demonstrated 10% Profit After Tax (PAT). Not many sectors in India have demonstrated this.

Q6: As someone who has supported agri-focussed enterprises, what are some of the business models that hold potential to build income for farmers as well as build their resilience towards climate change?

Any examples or enterprises from the Upaya portfolio that you’d like to share, who have demonstrated this impact on ground?

There are quite a few of them in our portfolio like Bharat Rohan, Pasidi Panta, Bharat Krushi Seva, Onganic and Agrify. All of them are doing a great job of enhancing small and marginal farmer’s income.

One of the examples is Bharat Krushi Seva enables climate smart precision farming through their advisory, inputs supply and market supply stack. They have brought 50,000+ acres of land under climate smart farming practices.

Background of Upaya Social Ventures

Upaya Social Ventures was founded in 2011 to create dignified jobs for people living in extreme poverty by building scalable businesses with investment and consulting support. To help create these jobs, Upaya invests in early-stage entrepreneurs dedicated to employing at least 50% of their workforce from local communities living in extreme poverty, where fair-wage jobs with predictable income are needed most. Upaya supports its investee companies through a blend of capital provision (seed funding) and capacity building – both vital in helping entrepreneurs boost their ability to scale. More recently, Upaya has made investments through their pioneering concept of ‘recycling philanthropy’, which draws together philanthropic funds to create a pool of recoverable grants from which investments are made.