India will play a pivotal role in achieving global climate goals

Amidst global concerns about depleting natural resources and surging energy demands, sustainable development has emerged as a vital alternative. A wave of startups is emerging to expedite and support this transition. Green Frontier Capital stands as India’s pioneering investment firm exclusively dedicated to nurturing companies that spearhead groundbreaking innovations within green sectors. These sectors encompass Electric Mobility, food tech, AgTech, Renewable Energy, BioFuels, Waste Management, Clean Water, Sustainable Lifestyles, and more.

In a recent dialogue with India Business and Trade, Mr. Sandiip Bhammer, Founder and Co-managing Partner of Green Frontier Capital, talked about their inspiring journey and unveiled their financing strategies that bolster the green transition initiative.

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IBT: How do you view the potential of the green financing sector in India?

Sandiip Bhammer: The green financing sector offers a substantial opportunity in India, with vast potential driven by key factors. Foremost, the Indian government’s strong commitment is evident, showcased by ambitious renewable energy targets aligned with robust energy demand growth. As the economy expands and urbanization persists, India’s energy consumption is anticipated to rise. Notably, the nation boasts one of the world’s fastest-growing middle-class populations, presenting an avenue to address this demand through sustainable energy solutions.

Additionally, substantial international backing is evident in India. Ranked as the world’s third-largest emitter of greenhouse gases, India’s pivotal role in achieving global climate goals, including net zero, cannot be overstated. Recognizing this, various international entities and nations are backing India’s green endeavours, spanning financial mechanisms, grants, and technological aid. This reinforcement significantly bolsters the green financing domain. In tandem with global Sustainable Development Goal (SDG) pursuits, India is proactively striving to ensure widespread access to affordable and dependable sustainable energy solutions. This harmonization opens up further avenues for green financing opportunities.

Furthermore, there are notable developments taking place at the corporate social responsibility (CSR) level. Numerous Indian companies are engaged in actively investing in sustainable projects and integrating sustainability into their CSR programs. This dynamic contributes to the growing demand for sustainable solutions. When viewed broadly, substantial opportunities emerge, encompassing electric vehicles, sustainable agriculture, waste management, ecotourism, climate change adaptation, and clean air technologies. India offers a wealth of prospects, underscoring its robust significance and potential as a green financing hub.

IBT: What motivated you to enter this space? Please tell us how the venture ideation and setup happened.

Sandiip Bhammer: We are a group of four associates, consisting of two active partners and two founding advisors. Each of us contributes a distinct and formidable expertise to the Green Frontier team. Personally, I have amassed approximately 26 years of experience in various financial capacities on Wall Street. My professional journey encompasses roles in investment banking and the public market sector, coupled with investment ventures in multiple startups. Meanwhile, my partner has a background as a founder in both FinTech and e-commerce ventures. Our shared aspiration to transition from employment under others to entrepreneurship propelled us. This shared goal originated during our time as university peers; we both pursued our MBA at Cornell. This common foundation fostered a deep mutual understanding and a desire to collaborate in due course.

The onset of the COVID pandemic provided us with an opportunity to reevaluate our long-term aspirations. With the world slowing down, we felt compelled to establish a lasting legacy that would make a meaningful impact. The realm of climate action resonated strongly, especially considering its significance in the global discourse. Given our familiarity with India’s role in climate change discussions, the convergence of our operational and investment expertise with our knowledge of India and climate issues presented an ideal avenue. We also received valuable guidance from esteemed founding advisors, including Professor Soumitra Dutta, the current dean of the Saïd School of Business at the University of Oxford, and Dr. Punita Kumar Sinha, a distinguished investor who notably served as the head of public markets at Blackstone in India and later as the chief investment officer at InCred. Upon forming Green Frontier Capital, we approached both Dr. Dutta and Dr. Sinha, inviting them to join our founding advisory board, a proposal they graciously accepted. This marked the inception of Green Frontier Capital’s journey.

IBT: What major investments have you made so far? Please share some notable success stories

Sandiip Bhammer: Fortune has favoured us as we entered the climate investment arena at an early stage, encountering limited competition. This enabled us to make initial investments in companies that have since emerged as industry pacesetters. Choosing standouts from our portfolio is akin to a parent picking a favourite child – a challenging task. While we hold a fondness for all our companies, there are some that stand out due to substantial value appreciation. Notably, our investments in enterprises like Battery Smart have witnessed remarkable growth, with Battery Smart now positioned as India’s foremost interoperability battery swapping network.

Our investments also extend to NutriFresh, India’s largest hydroponic farm situated in a single location. This endeavour recently secured funding from Neev Fund. Furthermore, we’ve engaged with EMotorad, a prominent player in India’s e-bike manufacturing sector. EMotorad is capitalizing on the burgeoning “Made in India” narrative, which has gained momentum in the wake of China’s reduced exports to the Western Hemisphere. Additionally, we’ve backed BluSmart Mobility, now India’s foremost all-electric ride-hailing platform. This dynamic venture poses a substantial challenge to industry giants like Uber and Ola. Among our roster is RevFin Services, the premier lender in the northern regions of India for the two-wheeler and three-wheeler segments, with expansion plans encompassing the entirety of India.

Identifying just one or two standout stories is challenging within our electric portfolio. It’s safe to say that numerous companies have achieved significant success, securing dominant positions, and we anticipate their continued growth. Presently, our deal pipeline is robust, with several imminent investments slated for announcement in the coming months. These upcoming endeavours are poised to establish themselves as dominant players in their respective sectors.

IBT: What are the key challenges to India’s green transition goals today? How can Green Financing help address these challenges?

Sandiip Bhammer: Certainly, as I’ve previously detailed, green financing occupies a crucial role in tackling the obstacles hindering India’s pursuit of sustainable transition. Before delving into its significance, it’s essential to outline the challenges confronting India. Foremost among these challenges is the financing hurdle. Procuring sufficient funding for green initiatives can prove daunting. Traditional banks and financial institutions might exhibit reluctance to invest in these projects, often due to perceived elevated risks and extended payback periods. Furthermore, infrastructure bottlenecks present another set of challenges.

Many green enterprises necessitate substantial infrastructure development or the upgrading of existing infrastructure. The present infrastructure might prove inadequate to sustain a swift and exponential shift towards a green paradigm. Regulatory and policy hurdles also come into play. Despite the government’s ambitious targets, the regulatory framework requires alignment to wholeheartedly bolster the transition to a green economy. Inconsistencies in policies and regulations can introduce uncertainties that discourage potential investors.

Seamless alignment between the central government and the states is imperative. While regulations are formulated at the national level, their execution is carried out by the states. Achieving a finely tuned collaboration between these entities is essential for smooth regulation implementation at the grassroots level. Moreover, challenges related to affordability and accessibility come into play. The green transition involves substantial costs, and considering that 80% of India’s population resides in rural areas, affordability remains a potential barrier, particularly in underserved regions. Additionally, the persistent reliance on fossil fuels should not be overlooked. While transitioning to a green economy is a priority, it’s crucial to acknowledge that India’s economy still heavily leans on coal and other fossil fuels.

Transitioning away from these conventional energy sources demands substantial shifts in our energy policy. Anticipate strong potential resistance from established fossil fuel technology corporations, many of which constitute the country’s largest companies. Garnering their support or cooperation is crucial. Moreover, addressing climate vulnerabilities is paramount. India, alongside the entire region, remains highly susceptible to climate change impacts. The looming threat of extreme weather events adds significant risks to green infrastructure. In conclusion, while applauding the praiseworthy objectives of our green transition goals, it’s imperative to tackle these challenges to pave the way for an effective and efficient transition to a sustainable economy.

IBT: What is going to be your growth strategy/investment focus going forward?

Sandiip Bhammer: Our approach centres on targeting the low-hanging opportunities, areas with minimal government intervention or policy sensitivity. We prioritize sectors benefiting from clear, secular trends where technologies address expansive consumer markets, demonstrating obvious viability in terms of both price and performance. Examining India’s greenhouse gas emissions, a striking revelation emerges: 45% of these emissions stem from food production, consumption, and travel. Consequently, our portfolio composition aligns with this insight, concentrating on Food tech, Agritech, and mobility sectors.

We also actually have a fourth area of interest, which is consumer lifestyles. So if every individual consumer in India measured their own carbon footprint and made lifestyle choices that were different, we would be well on our way to achieving a net zero target in line with what the Honorable Prime Minister has set. And none of those sectors that I just mentioned are impacted in any significant way by political sensitivity, energy transition sensitivity, or policy-making because they are low-hanging fruit, which is largely impacted by consumer choices. So our entire focus is going to be on those kinds of areas. We might add some additional sectors that we might invest in such as plastic circularity, waste management, water management, and so on and so forth. But right now our focus has largely been on how we expand our mobility portfolio, how we expand our food tech portfolio, and how we expand our AgriTech portfolio.

IBT: What are your recommendations to the government on the pace of Green Transition and supporting startups in this sector?

Sandiip Bhammer: The government wields significant influence in guiding green transition and fostering startup growth. From my standpoint, certain recommendations warrant consideration, foremost among them is the establishment of supportive policy frameworks. The government should enact well-defined and encompassing policies, encompassing goal-setting, standards implementation, and incentive provision.

Additionally, they should furnish financial incentives to startups. This could involve grants, subsidies, tax benefits, or low-interest loans tailored for startups focusing on green technologies. This approach effectively diminishes financial obstacles and stimulates investment in inventive solutions. A prominent domain of discussion pertains to forging specialized financial instruments and institutions. The establishment of green banks or funds, exclusively oriented toward supporting green startups, can introduce financial mechanisms that offer tailored products and assistance aligned with both the UN’s broader goals and India’s specific SDG objectives. It’s equally essential to bolster our research and development institutions, which are channelling their human capital into green technologies. Funding these entities, forming innovation hubs, and fostering collaborative projects between academia and industry, akin to practices prevalent in the Western world, can significantly expedite technological progress while simultaneously curbing costs.

A pivotal aspect of this endeavour involves bolstering incubation and acceleration initiatives. I’m a board member of a noteworthy accelerator named New Lab in the United States, which represents a public-private partnership between New York City and New Lab’s founders. The focal point of New Lab’s mission is nurturing startups in the green and climate change domains. This comprehensive approach encompasses funding, mentorship, networking avenues, and access to testing facilities. India would greatly benefit from establishing an analogous entity, akin to New Lab. This calls for a public-private partnership, necessitating collaboration between governmental bodies, the private sector, and academia. By pooling resources, expertise, and networks, such partnerships catalyze innovation and the commercialization of green solutions.

Furthermore, it’s imperative to establish a robust monitoring and evaluation mechanism to gauge the efficacy of policies, incentives, and programs. While proposing policies and funding mechanisms is commendable, it’s equally essential to maintain ongoing vigilance over progress and be prepared to recalibrate strategies based on performance. Given the urgency of climate change, this vigilance becomes paramount. Moreover, considering climate change as both a necessity and a significant opportunity, spanning multiple decades, India has the potential to take a leadership role. Therefore, it becomes imperative to implement a comprehensive approach encompassing these suggestions, including the creation of clear legal frameworks. Taking cues from practices in the West, India can adopt similar policies to steer its green transition narrative forward.

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Mr. Sandiip Bhammer is an Adjunct Professor of Sustainable Finance at the Isenberg School of Business at UMass–Amherst and was a Co-Portfolio Manager of the DA Capital South-Asia Investment Fund, based in New York.

As a veteran investor, he has a combined 30 years of experience in, both, “buy” and “sell’ side roles within the USA and Asia. He was, formerly, the Portfolio Manager and Head of South-Asia Investments at Balyasny Asset Management, L.P., an Associate Portfolio Manager at Amaranth Advisors LLC, and a senior investment banking executive at Citigroup Global Markets Inc., HSBC Securities (USA) Inc., and CLSA Emerging Markets respectively.