SBI, EIB to invest up to Euro 100 mln in Indian SMEs focused on climate change, sustainability

 The European Investment Bank and the country’s largest lender SBI on Friday entered into a pact to jointly pump Euro 100 million in equity financing into Indian small businesses focused on climate change and sustainability.

An agreement got signed on the margins of the European Union-India leaders meeting in Portugal, where both the financial institutions agreed to back the initiative, as per a statement.

SBI already invests in a vehicle called Neev Funds for its impact investing objectives, and the two entities have created ”Neev Fund II” for taking ahead this partnership. This is one of the EIB’s first private equity investments in India.

“Neev Fund II will provide equity to SMEs focusing on mitigating climate risks, promoting social development, job creation, and gender equality at scale,” SBI chairman Dinesh Khara said.

He added that the cooperation with EIB, one of the world’s largest providers of climate finance, will further strengthen and deepen the bond between India and the European Union.

The EIB and SBI will together support the new Neev Fund II investment fund that will unlock climate action and sustainability investment by businesses across India through new equity financing.

Under the management of SBICap Ventures, an SBI group company, Neev Fund II will invest up to Euro 100 million in Indian small and medium-sized enterprises (SMEs) and provide growth and expansion capital to companies offering solutions for clean energy, electric vehicles, efficient use of raw materials, and water and circular economy projects in the country, the statement said.

The fund will enable Indian innovative and emerging companies to fund their growth through equity or quasi-equity instruments, it added.

“Innovative solutions often require innovative forms of financing, such as private equity funds. Our partnership with the State Bank of India will create a much-needed source of equity financing for climate action and environmental sustainability solutions offered by innovative SMEs,” EIB’s head of operations in India, Christian Kettel Thomsen, said.

SBI Ventures” managing director and chief executive Suresh Kozhikote said the Neev Fund generates commercially attractive returns while making a significant positive contribution to society.

Neev Fund II will provide equity and quasi-equity to SMEs (Small and medium-sized enterprises), targeting sectors that support the achievement of the UN Sustainable Development Goals (SDGs), particularly aiming to limit climate change through energy, agricultural, water, and waste management technologies.

This could include businesses offering solutions for the development of new technology for climate change, environmental protection, electric vehicles, and any other innovative products and services that could benefit climate action across the world, the statement said.

SBI’s PE arm hikes climate fund’s target 5 times to Rs 2,000 crore

SBICap Ventures has already got commitment from European Investment Bank (EIB) for about Rs 215 crore.

State Bank of India’s private equity capital arm has scaled up the target for its Climate fund by five times to Rs 2,000 crore on growing emphasis on investments in clean technology and environment-friendly businesses.

This climate and environment-focused fund started off with a corpus of Rs 400 crore. When it approached the market for commitment, it got good traction from global investors. This led to scaling up of its corpus target, SBI group executives said.

SBICap Ventures, an SBI group company that is managing the fund, has already got commitment from European Investment Bank (EIB) for about Rs 215 crore. It is also talking to financial institutions from Japan and the United Kingdom for commitments. Investment by a Japanese agency is likely to be over Rs 200 crore. Neev Fund II will invest in Indian small and medium-sized enterprises (SMEs). It will provide growth and expansion capital to companies offering solutions for clean energy, electric vehicles, efficient use of raw materials and water as well as circular economy projects.

It will enable India’s innovative and emerging companies to fund their growth through equity or quasi-equity instruments.

Besides overseas investors, a clutch of domestic financial institutions are also going to invest in the Neev II fund. Small Industries Development Bank of India (SIDBI) has indicated that it will commit Rs 160 crore. The total commitments are expected to touch Rs 1,000 crore by the end of this month. SBI has given a fairly sizable commitment that is about Rs 400 crore (20 per cent of the fund corpus).

SBICap Ventures expects to have the full fund up and running by June 2022. Work has also commenced on making the investment. It has made commitments of Rs 275 crore into three companies, including two in waste management and another in pollution control technology.

Besides the climate fund, SBI group’s entity is also managing Neev Fund I — a Rs 500-crore one started in 2015. It is a partnership between two governments – the United Kingdom and India. The SBI group was given the mandate to manage the fund.

Neev Fund II to invest in Chakr Innovation

Neev Fund II, a sustainability and SME-focused fund managed by SBICap Ventures, announced its first investment of an undisclosed sum as Series B growth capital into Chakr Innovation — an emission control device manufacturing company that mitigates pollution at source and captures harmful particulate matter emissions.

Chakr Innovation was started by two IIT Delhi engineers — Kushagra Srivastava and Bharti Singhla who had a passion to solve the threat of air pollution for major Indian cities.

India’s National Clean Air Programme (NCAP) and the National Green Tribunal (NGT) have identified diesel generator sets as the major source of emission of particulate matter. Recently, eight States have notified that all operational DG sets of capacity 125 KVA and above have to be retrofitted with emission-control devices or shift to gas-based generators.

The notifications stipulate that the retrofit emission control device should have a minimum specified particulate matter capturing efficiency of at least 70 per cent. Chakr’s technology is helping industries reduce emissions, staying compliant as well as drive a positive environmental change

The Neev Fund II was announced during the EU-India Leaders Meeting and has already secured backing of the European Investment Bank (EIB), Foreign, Commonwealth and Development Office, Government of UK, and the State Bank of India (SBI). It aims to provide growth and expansion capital to SME companies working towards efficient use of raw materials, water, clean energy, sustainable mobility, and circular economy in the country.

Akshay Panth, Principal, Neev Funds, said: “Chakr is emerging as a leading mission-driven, clean-technology company that will transform energy managers’ woes of pollution risk. Chakr is part of a new league of clean-tech focused SMEs that are shaping the fight against climate change. Neev is delighted to be part of Chakr’s journey in helping them develop newer markets and products.”