NDF - Financing for climate change and development projects

NDF joins ADB in launch of ADB Ventures – to tackle supply-demand gap for climate technology start-ups in Asia-Pacific markets

Photo: Asian Development Bank
26.02.2020

NDF together with The Asian Development Bank (ADB) as Fund Manager, is formally announcing the launch of ADB Ventures (ADBV), a new venture capital and technical assistance facility to boost start-ups in Asia Pacific with impact technology solutions that address climate change and contribute to Sustainable Development Goals (SDGs)

Framing the challenges and opportunities
“From the perspective of combatting climate change, the project’s target geographical area is crucial,” explains NDF Program Manager, Aleksi Lumijärvi. “The many countries that make up the Asia-Pacific 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.” 

On the positive side, there are already plenty of ready-to-scale climate and technology-enabled solutions which could have a sizable impact in the region. However, the companies offering such solutions are deterred by the often-daunting barriers for market entry. On top of this, the innovation ecosystems particularly in smaller markets are less developed and the availability of venture and growth capital limited, making the risk-return ratio unattractive and scale up difficult.

ADB Ventures set to tackle supply-demand gap
“There is a mismatch between the supply and demand of new and promising climate technologies and solutions in these developing markets,” says Lumijärvi. “ADB Ventures has been set up to address entry barriers by de-risking and accelerating their market entry and dissemination.”

ADB Ventures will help bring these solutions to market by leveraging its extensive operational networks and filling the risk capital gap that innovative early-stage companies face, particularly in smaller and peripheral markets.

NDF the first investor committing to the fund
The estimated size of the Facility’s first investment fund and technical assistance is EUR 54.5 million (or approximately USD 60 million), with NDF providing a capital contribution of EUR 10 million for the Investment Fund.

“NDF’s involvement from the outset as an anchor investor has been catalytic, through their support in the design and piloting phases, as well as being the first committed investor,” says ADB Director General for Private Sector Operations Michael Barrow. “With NDF's support, ADB Ventures has successfully completed fundraising. We look forward to continued engagement with NDF as ADB Ventures Investment Fund 1 becomes operational.”

How does the fund work?
Unlike traditional venture capital funds, ADBV is reinforced with a three-year, USD 12 million technical assistance program that sets it apart from other funds. This is designed to support start-ups through two main sub-programs:

Growth companies enter into “ADBV domain” through the ADB Venture Lab, a corporate innovation program implemented in partnership with industry and leading accelerators for start-ups. From here, some of them become eligible to receive SEED pilot funding.

ADB Ventures SEED validates and de-risks technology pilots and promotes expansion into emerging markets that growth companies might not otherwise prioritize. This could include helping them create networks and connect with solid early adopters, while navigating any tricky legal or regulatory requirements. Successful pilots here can be taken forward to receive venture capital investment from the ADBV Fund.

Sustainable infrastructure and inclusive markets
“The Fund is a good fit with NDF’s core mandate of promoting both climate mitigation and adaptation, with a focus on gender equality, as well as box checking many urgent SDGs,” says Lumijärvi. “Not least by bringing better access to basic services such as clean energy and clean water; creating new industries and improving the competitiveness of existing ones; and creating decent jobs in climate solutions as well as solutions supporting the economic inclusion of women.”

A minimum of 80% of the Fund is targeted to invest in climate solutions that include mitigation, adaptation and resilience. While a minimum of 75% will be invested in solutions with a gender impact.

Nordic matchmaking interest
Nordic countries are often seen as a cleantech hub, and ADBV is actively sourcing solutions from these countries, with discussions already underway with a number of climate-sector growth companies, venture capital investors, as well as public and private sector incubators.

“Our involvement in the rollout as an early-stage investor has positively positioned NDF as an active partner in matching ADB Ventures with promising Nordic actors, “says Lumijärvi, adding: “The pipeline already includes several Nordic cleantech companies, and at least one in an advanced stage.”

ADB Ventures expected outcomes:

  • Climate-related outcomes
    • Greenhouse gas emissions reduced
    • Energy and water savings
    • Adaptation and resilience benefits
    • Improved productivity in infrastructure, industrial and service sectors
    • Additional climate finance mobilised
  • Gender- and inclusion-related outcomes
    • Enhanced access to basic goods and services
    • Job creation
    • Supporting women in ownership, leadership and employee roles
    • Increased access to finance for entrepreneurs and SMEs

More information:
ADB Unveils Venture Platform to Invest in Impact Technology Startups
ADB launches $50 million fund to support SDG-minded startups
ADB Ventures: design, piloting and implementation phase [NDF C120]
ADB Ventures [NDF C123]