Emissions commodity fund management company Green Ventures International Llc. has launched a $300 million (Rs1,182 crore) fund that will focus on carbon commerce—the market activities that reduce carbon emissions and provide returns on that reduction. The firm’s team, which will grow from 15 to 40 this quarter, intends to do four types of investments from its India Carbon Fund I. They will invest in existing carbon credit projects, start renewable energy projects, or link foreign-grown clean or energy-efficient technologies with Indian entrepreneurs. The investors in this open-ended fund come mostly from Europe and the US and Green Ventures expects returns of 15-20% over a five-year period.Krish Krishnan, founder and chief executive officer, spoke to Mint about the firm’s plans. Edited excerpts:
Why are you entering this market now?
We saw a gap in the market here. Many of the global banks and funds that look at carbon commerce abroad found India’s market fragmented and too difficult. I have been watching carbon commerce since the Acid Rain Emissions Trading in Chicago under the first President George Bush, and the US Initiative for Joint Implementation, which were precursors to the Kyoto Protocol’s approach to carbon credits. So, I wanted to fill this gap, and returned to India to research the space for two years in advance of launching the fund. India requires a significant local network and understanding at the grass roots level.
So how do carbon commerce-focused funds work in other parts of developing Asia?
In China, there is the classic private equity model where investors enter forwards for carbon credits. And they take minority positions in carbon credits, converting the value into dollar equivalents, into shares, and taking a percentage. In Malaysia, it is the classic commodity approach, and investors look for carbon credits already certified and invest purely in those credits with no interest in the project. We are the only fund focused on India right now, and are really doing a hybrid of thesetwo models.
Why did you choose this model?
It is not good to look at carbon credits alone. For example, investment in clean technology, such as solar or wind, could have a multiplier effect. Every application of the technology will have the potential for carbon credits.