NDF - Financing for climate change and development projects

NDF’s newest climate finance project, ADB Ventures, targets matchmaking at Helsinki’s Cleantech Venture Day (3-5 June 2019)

Photo: Aleksi Lumijärvi
Opening Session of the Cleantech Venture Day
Photo: NDF
Photo: NDF
4.06.2019

NDF, together with implementing partner, The Asian Development Bank (ADB) is designing a new venture capital and technical assistance fund, ADB Ventures, to boost innovative early-stage growth companies with climate technology-driven business models and solutions for Asia Pacific

“This fund is a truly new approach to a well-known challenge,” asserts NDF Manager, Aleksi Lumijärvi, who will be overseeing the rollout from the NDF side. “The demand-driven approach combined with patient venture capital is really something quite new and potentially very impactful!”

South East Asia a must win battle for climate change
The project’s target area is crucial from a climate change perspective. The many countries that make up this region have some of the fastest growing economies in the world, characterised by expanding industrial production and a rising middle class, driving higher energy consumption and therefore greenhouse gas emissions. 

“We have to win the battle there if we want to combat climate change,” Lumijärvi says. “It’s also a good business opportunity, but there are challenges too.”

Barriers for entry abound
The initial target markets in the Greater Mekong Sub-region are fragmented with many individual countries of limited size, entailing high-risk, high-cost market entry.   “Each country has its own sets of legal and regulatory, market, linguistic and cultural challenges to be navigated,” Lumijärvi explains.

There are already a number of ready-to-scale climate technologies that could have a sizable impact in these markets, but the companies offering them are deterred by the sheer number of barriers for entry. On top of this, the innovation ecosystems in these smaller markets are less developed and the availability of venture and growth capital limited, making commercialisation difficult.

“Often, the risk versus reward ratio is not attractive,” says Lumijärvi, “because let’s face it, growth companies would much rather invest in one market entry and tackle just one set of challenges, which means they’re more likely to choose a larger and more developed country with a larger potential.”

So, what’s the solution?
To address these issues in a demand-driven process as well as create market continuity ADB Ventures is set to step in with a double-pronged approach: The ADB Ventures Tech-for-Impact Lab, to open up the way for new market entrants by facilitating and co-funding pilot projects; and The ADB Ventures Investment Fund to make follow on venture capital investments in growth companies with successful pilot projects along the way.

The fund first helps cleantech growth companies create networks and connect with solid early adopters, while navigating any tricky legal or regulatory requirements.
 “With this kind of high-risk intervention, many businesses will fail or underperform, but those that succeed can be taken forward within the fund for further investment.”

Financing from the NDF, together with funding from ADB and other partners, will be used for the design, piloting and implementation of the ADB Ventures mainly during 2019, and the Investment Fund is expected to be operational by the first-quarter 2020. The 20-year fund is targeting equity investments of around USD 40 million.

Match-making at Cleantech Day
Lumijärvi, who has worked in the cleantech sector for more than 20 years in both developed and developing countries, is keen to get started and Cleantech Venture day at Finlandia Hall Helsinki will be a good first stop.

“The advantages of being at the frontlines of Cleantech Venture Day are two-fold,” explains Lumijarvi, who is a member of the jury in the renewable energy pitching session at the event. “For one it will be a good chance to mingle and meet with promising climate-tech companies, and on the co-investor side, to discuss potential for co-investments and other cooperation with cleantech venture capital investors.”

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