Q1: Green Artha has been focused on bridging the finance gap for startups working on climate action. Could you share with us the inspiration behind founding Green Artha and the interventions that you are looking to build?

Green Artha invests to achieve climate impact at scale, particularly in light of India's economic growth potential. We operate by investing in the most impactful and scalable climate startups and leverage a systemic approach to support their success and climate impact more widely.

When we first started GA in early 2020, it was clear that there is not one singular factor that slows adoption of climate technologies -- it was not a chicken or egg problem. To achieve climate impact and investment returns, we would have to take a systems approach to the market, financing gaps and addressing slow commercialization cycles.

Our work achieves impact by proving innovative and fit-for-purpose climate financing models; accelerating the adoption of innovations through demonstration and commercialization support; developing the broader ecosystem through initiatives like the Climate Capital Network; and bringing best practices and standards in climate impact measurement to India, as SteerCo members with Project FRAME.

As a firm that was started weeks before the pandemic started, we were initially slowed down, but leveraged the opportunity to test and validate a number of the approaches that are now the foundation of our work. As the founding fund managers of the ACT for Environment fund, we were selected by India’s leading VCs to implement our approach to accelerating market success of climate technologies.

During this time, we funded 11 high-impact climate tech startups, tested and validated our approach to supporting techno-commercial validation, and delivered a portfolio that has since leveraged our capital and support to rapidly address adoption challenges, secure necessary certifications, obtain long-term contracts with industry and secure 26x follow-on funding.

We are now raising a structured equity fund to expand on our approach

Q2: As you work to enable an environment conducive to climate investing, could you share a little about the investment thesis of Green Artha’s Green Economy Fund? What are the nature of solutions that you are looking to fund?

It’s not a secret that keeping planetary warming within livable limits will require a full green transition; not just an energy transition but much more akin to an industrial revolution, with shifts in the means and modes of production.

Given the enormous market opportunity and entrepreneurial innovation, we primarily focus on businesses and innovations in India. With the right support, India’s climate entrepreneurs and their tactical approach to productizing innovation can deliver the green transition better, faster, and cheaper than in most markets, provide technologies competitive with developed markets, and provide viable pathways for other developing economies to transition cleanly.

GA invests in the innovations, products and materials that will shift the entire market.

We invest in high-impact businesses that will be the backbone of a green economy, with the ability to abate or mitigate high emissions intensity at scale, and power the jobs of the future economy– Industrial & SME Decarbonisation, Circularity, Energy Transition, Built Environment, Green Chemistry and Alternative Materials.

Often the businesses that will have both the highest impact and the largest market opportunity in a green economy would be considered "boring businesses" by mainstream investors. At GA, we see these as foundational to the transition and as clear business opportunities. Through our combination of fit-for-purpose capital and customized commercialisation support, we are able to de-risk at the critical pre-growth inflection point, as well as addressing FOAK or business model funding needs for manufacturing key industrial inputs.

Many of the businesses we look at sit at the intersection of adaptation and mitigation, with their deep impacts on livelihoods, health, well-being and water security. Clean manufacturing, for example, is the best adaptation from a socio-economic and climate perspective. It has the dual benefits of creating more comfortable (waste heat recovery systems, for example, improve worker conditions) and higher wage jobs, while ensuring that manufacturing is transitioned to cleaner processes.

In short, the solutions we fund address hard-to-abate sectors, have clear climate attribution, and are integrally aligned with economic development and livelihoods.

Q3: The last 3 years have seen an uptick in investments flowing to climate focused startups; however a large proportion of the funds have been concentrated on the electric mobility sector.

From your experience, what are some of the challenges, both from an investor and investee perspective that are hindering the flow of private capital to other lesser explored solutions? What could be the pathway to bridging this finance gap?

In 2019-20 we surveyed 100 climate startups receiving varying forms of capital and incubation support. These businesses called out two primary challenges: accessing commercial customers towards achieving techno-commercial validation; and access to the right capital at the right time. 5 years on, these challenges remain.

The most impactful climate innovations are often deep-tech/ hardware-based or IP-led. Products that are made for industry need to meet a variety of quality and safety standards in addition to offering customers a meaningful value-proposition. There are sometimes significant gaps between what startups understand to be commercial readiness and customer expectations.

Climate innovations struggle to cross the “second valley of death” – they get stuck in the gap that exists between the pilot graveyard and commercial adoption. The pathways from incubation and acceleration to market adoption have not yet been normalized.

At the same time, many climate tech businesses do not align with the investment mandates or funding instruments preferred in the market. Fundamentally these are not riskier investments, generally the contrary, but they require fit-for-purpose funding. FOAK funding, not as it is provided in the US/ Europe, but more specific to Indian markets, is necessary to address capital gaps. For many funders, this line of sight on commercialisation is still unclear and the risk-reward profiles of these businesses are not viable for funding.

At GA we are clear that the climate tech ecosystem needs a larger and more varied set of tools in our funding tool-kit. A broader set of tools that can straddle grant, equity, debt and all the instruments in between is needed to strengthen the climate capital stack, extend the continuum of capital and create capital efficiency. Given that we do not have anywhere near enough capital available to fund the transition required, this capital innovation and efficiency is particularly important.

Through some of our work over the last few years, though, we’ve been able to demonstrate that innovative capital and customized demonstration and commercialisation support can meaningfully address this uncertainty and derisk businesses for markets and funders.

Q4: With Green Artha’s Climate Capital Network, you work closely with the key stakeholders in climate investing.

What are some of the challenges that you observe investors facing, which could potentially be addressed by building more ecosystem partnerships? How could the ecosystem leverage and support such networks more effectively?

While climate tech has become a core part of many funding mandates in recent years (as evidenced by the significant funding uptick), we see that several funders continue to be interested in better understanding the nuances of climate technologies, business models that will scale, learnings from others, unintended consequences and impact measurement. Fundamentally, this was one of the reasons we set up the Climate Capital Network – as a way for funders across grant, equity and debt to collaborate, exchange insights, build pipeline, and ultimately extend the climate capital continuum.

This is why our sessions are very driven by member and market needs – investment and sector deepdives, understanding other funder mandates and focus areas, and integrating with global impact measurement best practices. We’ve seen these sessions, as well as our annual report on emerging trends in climate finance become quite useful across the ecosystem. In recent years, we have actively collaborated with Project FRAME to both progress standards in climate impact measurement in India, and also extend the reach of CCN members.

At GA, we also build and leverage partnerships with industry and capital markets, as integral to accelerating the commercialization of our companies.

We believe that networks like this are critical to addressing systemic challenges, sharing best practices and learnings, developing consensus on taxonomy and impact measurement, building bridges between industry and innovation and capital, and creating radical market efficiencies.

Q5: You have recently collaborated with Project Frame to build more capacity around climate impact measurement. Could you share a little more on this association?

How could Indian investors approach building an Impact Measurement and Management (IMM) methodology for tracking the climate impact of their portfolios? Are there some best practices that you would like to suggest?

From our experience as investors, and our engagement with global peers, we strongly emphasize the importance of building impact into the fund operations, investment processes and team approach. At Green Artha, potential for climate impact is our first screening. This ensures impact is standard operating procedure, not an extra or good-to-have in the business.

At the same time, IMM for climate investments must be science-based, aligned with the Greenhouse Gas Coalition, baselines are normalized for India/ the Global South, and be integrated into the business metrics and reporting parameters of portfolio companies. It is both onerous and inefficient to create very expensive, time-consuming, complex and unscalable models of IMM.

At GA, we focus on a limited number of high-quality, science-based climate measures, livelihood and gender metrics and business metrics linked to growth, scale and operational excellence. By adopting standards and scientific measurement, we make sure that we are evaluating the potential and likelihood of climate impact as part of the investment process -- this prevents or makes green washing difficult, and aligns with the best practices globally.

We’ve been associated with the Project FRAME (Prime Coalition) work for a while now, given the importance of aligned taxonomies and scientific measurement for climate investment. Last year we hosted a Climate Capital Network session for the FRAME team to share more about their efforts with Indian investors/ funders, and earlier this year we joined the FRAME Steering Committee to better represent Indian climate investors. We see this as an important opportunity to both share emerging best practices from FRAME with our colleagues in India, while informing FRAME methodologies on the adaptations needed to address the realities of climate in India and the Global South.

Q6: As the industry builds more traction on climate investing, how do you see Green Artha’s role evolving in this landscape? What are some of the strategic areas on which you seek to synergise with other ecosystem players?

We’ve always partnered and built bridges for more systemic impact and we look forward to continuing to collaborate with several players across the ecosystem:

• Indian and global funders to extend the climate capital continuum and share funding opportunities
• Corporates and industry to facilitate the green transition and adoption of climate innovation
• Impact measurement coalitions like Project FRAME to promote integrity in climate investing and prove investing models built on a coupling between climate and economic returns
• Ecosystem partners like IIC and ANDE to share insights on climate finance innovations
• ESOs and other entrepreneur-groups to work hands-on/ share learnings and pathways to commercialization

Background of Green Artha

Green Artha is a climate venture fund and innovation firm established to make a low carbon economy possible. It works at the intersection of climate innovation and finance to accelerate the speed and scale of the adoption of impactful climate technologies. Apart from Investing in transformational technologies, often in white spaces, it also works to build the networks to increase existing climate funding, mobilize new capital and create a continuum of capital.

Conceived to help climate startups reach commercial success, Green Artha works with startups, think tanks, incubators, leading corporates, philanthropists and investors to align available resources, provide customized support and strengthen the viability of the sector.