India becomes preferred clean tech investment hub, $2.4 billion raised in Q3

India has emerged as one of the leading destinations for clean technology funding, surpassing China in recent months. This shift has been fuelled by efforts to enhance domestic green manufacturing and attract global investors.

In the third quarter, India emerged as the second-largest market for green technologies, driven by a significant surge in funding. In the same quarter alone, clean tech deals worth approximately $2.4 billion were finalised in India—more than four times the value of deals in China. This makes India the second-largest market globally for clean tech investments, trailing only the United States, according to data from BloombergNEF.

Climate Technology Fund

Raj Pai, founding partner of GEF Capital Partners, a climate-focused private equity firm, attributes this momentum to India's strategic push to expand local clean energy capabilities and reduce reliance on Chinese imports. Additionally, India's ambition to position itself as a global exporter of green technologies has further strengthened its appeal to investors.

Pai said, "The attractiveness of the climate sector for both public and private capital is very high."

The Govt. of India has introduced a series of policy initiatives driving significant growth in the clean energy sector. According to the International Energy Agency (IEA), India is poised to experience the fastest expansion of renewable energy among major economies throughout the remainder of the decade.

This year has seen a surge in public listings from over a dozen renewable energy and electric vehicle companies, including solar panel manufacturer Waaree Energies Ltd. and electric scooter maker Ola Electric Mobility Ltd. Notably, NTPC Green Energy Ltd., a clean energy firm, has witnessed its shares climb by more than 30 per cent since debuting on the market last month.

Abhinav Sinha, Head of Technology and Telecoms at British International Investment Plc, the UK government's development-finance arm, said, "Climate is the hottest topic for venture capital right now in India".

 A commitment to invest at least $1 billion in climate-related projects in India by 2026 has been made by the BII, which has invested more in the country than any other.

Sinha noted that nearly 25 per cent of all seed-stage investments by venture capital groups in India are now directed toward climate-related startups.

According to BloombergNEF (BNEF) data, India made significant strides in green technology funding during the third quarter, closely competing with China. However, year-to-date investments of $3.6 billion fall short of China's $5.6 billion. To achieve net-zero emissions 20 years ahead of its current 2070 target, India would need to mobilise an estimated $12.4 trillion in investments, as projected by BNEF.

As Eversource Capital closed its largest climate impact fund in 2022 and is currently investing over $125 million in energy demand services, CEO Dhanpal Jhaveri said, "We are not even in a pond, we are in a puddle where we need an ocean of capital." 

Among India’s approximately 800 climate-focused startups, only about 25 per cent have secured funding over the past decade, collectively raising $3.6 billion. This figure pales compared to the more than $19 billion garnered by fintech firms during the same period, according to a September report by IIMA Ventures and Mitsubishi UFJ Financial Group Inc. The report also highlights that green startups face significant challenges in attracting growth-stage funding.

Information credit: Bloomberg; Yahoo!finance

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