Going green is good for the pocket too

This week, the IFC — the private sector lending arm of the World Bank group — announced it would make its first investment of euro 15 million in a third-party environment-focused private equity fund managed by Aloe Private Equity. The fund, with its corpus of euro 140 million, is targeted at investing in small emerging companies, primarily in India and China, that are focused on clean and renewable energy, emissions controls, waste recycling and eco-processes. The aim: To promote companies that are unlikely to receive funding from mainstream private equity groups.

Besides the IFC, Swedfund — a risk capital company owned by the Swedish Government and Propoarco, the private sector financing arm of the French Development Agency — would also invest euro 8 million and euro 5 million respectively in the same fund, indicating the growing popularity of such green endeavours.

With more such products to hit the market soon, fund managers claim the potential to invest in green companies is immense and returns are also expected to be healthy.

“The returns are likely to be immense,” said Vivek Tandon, general partner at Aloe Private Equity. “For instance, we invested in Hyderabad-based Greenko group, that owns and operates renewable energy projects like biomass plants and hydropower projects. The value of this company has grown almost seven times since we invested in 2006 through our first environment fund.”

ABN Amro’s sustainable development fund manager Amit Nigam voices a similar opinion. “Our fund has generated returns of 60 per cent since its launch in May. We work on the principle that over a long term of three to six years, these companies outperform the index, as they are less likely to be impacted by regulatory changes in the environment space. In fact, in Brazil and in Europe, such funds have been outperforming indices consistently,” he said. Since its launch in 2001, The Brazil Ethical Fund has given a return of almost 330 per cent, compared to the 253 per cent return that the benchmark national index of Brazil’s Bovespa has generated.

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