How Solar is Attracting Funding as ESG gains focus amongst venture capitalists

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It would have been hard to believe if someone would have said a decade ago that crude oil firms, the ones that sit on piles of invaluable crude oil, would be investing in solar or renewable businesses

While this switch from traditional energy sources to renewable is global, India too has seen its fair share of sustainable moves. For example, Reliance, the Indian oil conglomerate, announced in its AGM held in 2021 that the company would invest close Rs. 75,000 cr in clean energy and will be building four Giga factories.

Not just announcement, but the company soon acted upon it and acquired REC Solar Holdings AS (REC group) from China National Bluestar (Group) Co. Ltd at an enterprise value of $771 million and another 40% stake in Sterling & Wilson Solar Ltd, a Shapoorji Pallonji Group (SP Group) company, for about ₹2,845 crores.

Such has been the turn of times in the last few years that the investor community has been in the driver’s seat in forcing corporations and businesses to take “Green Decisions” ending the notion that sustainability is a fad.

Startups paint them Green too

Green. business has seen such strong investment flows that it has changed the complete investment narrative more towards climate change solutions. This has been well aided by a favourable regulatory landscape and the availability of scalable climate ventures.

Climate and Physical Risk Call For Urgency: Regulations and Stakeholders Activism

While there has been a strong push of funding the business environment and all stakeholders are now creating pressures on businesses to act on climate change. Early this year, two large oil majors lost their battle against climate change activism. A Dutch court ordered Shell to expedite the reduction in its greenhouse gas emissions to 2030 as against 2050, and ExxonMobil faced protest from climate activist shareholders over its failure to set a strategy for a low-carbon future.

And this is not again global closer home, State Bank of India’s decision to invest its green bonds’ proceeds in the Carmichael thermal coal mine in Australia has attracted a lot of flak from its international investors.

Aiding to this also is the evolving regulatory space. While it has been a nascent step, but SEBI has beefed up the disclosure measure regarding ESG compliance especially covering aspects such as resource usage (energy and water). SEBI recently revised its Business Responsibility and Sustainability Reporting (BRSR) framework, requiring the top thousand listed entities by market capitalisation to provide environment-related disclosures. These are expected to boost demand for a set of green companies that provide energy and water efficiency solutions.

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Just like the whole world, In India too, the demand for energy has been growing at a rapid rate. While the capital requirement for setting up solar energy plants is super high, startups are playing their own part in various ancillary fields like components manufacturing, artificial intelligence, machine learning, and analytics so that the transition to sustainable sources can be smoother and more meaningful. In recent years Indian startups have grabbed global investor liking as well. In 2019 Indian startup Amplus Solar was acquired by petroleum giant Petronas for Rs 2,700 crore for its solar energy-as-a-service business model. The fact that it owns 250 power plants, which delivered opexbased pricing to its customers, aided big time for the company. Not just that, Sachin Bansal too pumped in $32 million in Ather Energy, which manufactures electric scooters. Ather energy plans to scale up across different cities over the next two years. With the booming Indian economy and a massive population of over 1.3 bn and with assumptions that the coal reserves of the country will not last beyond 2050, India seems to be in a super place to embrace Solar as its alternative source of energy. This also means that the budding startups around Solar and renewables will be full of opportunities and are expected to grow constantly. There is a massive scope of technological progress where startups would play a major role.