Q1: Given your experience and interest in investing for sustainability and impact, how are you viewing the impact investing space in India currently?
The impact investing ecosystem in India has grown rapidly over the last decade, and while to date the majority of capital directed at making specific and measurable impact has come from offshore – from development finance institutions, institutional investors, high net-worth individuals (HNIs), NRI Family Offices, and global foundations – we believe that the Indian investor landscape is beginning to gear up for a major, sustained capital deployment in impactful areas that will change the whole soul of India for the better and allow our country to truly be a global power player in all areas. As an investor – especially one who is looking at a time horizon of 20-25 years – this is an extremely exciting, yet also tense situation, as the framework, legislative guidelines, and financial environment that the investments will occur in over the next two decades will have consequences that span the globe. Without sufficient monitoring, collaborating, adapting, and doing so rapidly, these could easily exacerbate issues if misguided or unethical actors hold sway.
The historic rise of impact investing in international markets such as Europe has demonstrated the far-reaching, inclusive, and positive role that all types of investors can play in changing the world around them for the better. While we believe India can adopt and learn some from the strategies employed in the Western world, these need to be tailored and modified to adapt to vastly different cultural, developmental, demographic, financial, and social systems.
The most obvious and perhaps powerful example of how an investor group, in this case, Family Offices and HNIs, with their extensive business network, resources, and access, must play an important role in India’s investment landscape, and given the long-term investment horizon this group generally works with, focusing on generation next, it seems obvious that the movement to create, expand and embed positive impact across India must be led by this group. They can support innovative social enterprises with their patient and flexible capital, take higher levels of risk tolerance which will be needed in the coming decades, and most importantly, due to the strong social and cross-familial ties within this group, cooperate and collaborate more easily with one another than professional business organizations, or warring politicians. The absolute necessity of transparent and truthful cooperation in addressing the issues India and the Earth face means that anything less actually is a destructive force, negating benefits we can create over time.
We have seen over the last 30 years or so, the strength, speed, and resilience of the Indian entrepreneur, as an increasing number of technological innovations have emerged from India, solving unique problems that can be adapted to fit globally. Simultaneously, we have seen the proliferation of Indian brain power to the top of the largest and most complex global business organizations. Along with both these highly visible factors, several less public ingredients for India to rise to the position of the world’s foremost economy and diplomacy are now in place. However, how the political and legislative system, as well as the involvement of the rapidly growing and increasingly sophisticated financial and business environments combine and cooperate to utilize these, in line with a long-term view, will be essential in determining if and when this happens.
Further, we are increasingly seeing organizations of all types and sizes beginning to adopt policies and strategies geared towards creating a more supportive environment for generating positive impact – through the proliferation of sustainable practices to ensure organizations are future-focused and future-fit, to rebuilding the way we produce, consume, purchase, and live our lives.
According to the Impact Investors Council (IIC), Indian impact-focused enterprises attracted more than $15 billion of capital from 2020 to 2022 – which while a sizeable amount, pales in comparison when one sees that only 3% of Asia-directed ESG capital was directed into the Indian market during the same time. This shows the massive gap we need to close just to be at parity from a population pro rata standpoint, while simultaneously defining the massive amount of capital that could flow into India should we enact appropriate policies, provide diverse and attractive incentives, and reduce bureaucratic overreach and involvement. This would additionally help to improve the reputation of Indian financial and investment markets, which some foreign investors currently view as being disorganized and mismanaged. Whether these views hold water or not is irrelevant today, as the overriding assumption and start point for most international investors has historically been to discount India steeply compared to China, in particular, and even with other parts of emerging Asia.
This perception of Indian markets was very abruptly changed during India’s time with the G20 presidency in 2023 and the commitment demonstrated by various stakeholders in the government and in the private sector to begin the long process of trying to fundamentally shift the view investors have of India, which frankly is largely unfounded and severely outdated. To attempt to do so by aggressively utilizing the gravity of the largest existential crisis mankind has ever faced in climate change, to sound the gong for the need to change our approach to capital allocation decisions, and not look solely at returns but at a much more holistic, and beneficial, approach, truly highlights the ambitions India possesses.
Given India’s scale, population size and demographics, geographic and cultural diversity, and the raft of issues the country must contend with while trying to develop and improve the livelihoods of close to 1.5 billion people, the idea of investing to create tangible impact in the world we all live in, as contrasted with a series of 1’s and 0’s in a bank account somewhere, is appealing because of its sheer necessity and that to address the concerns we face in a positive and mitigating manner, will by default, generate financial returns.
While the socio-economic complexities of the Indian context will definitely play a determining role in how the impact investing landscape progresses, we believe that there exist adequate avenues for different investor groups to participate in the life cycle of investments, depending on scale, investment type, region, sector, and other factors. India requires somewhere between US$22-25 trillion in climate change-focused investment in order to meet its stated Net Zero goal, which means all sources of capital will need to be tapped and capital deployment by all investors and stakeholders managed in a coordinated manner to ensure issues are addressed in time and in order of severity.
Q2: Could you share with our readers about Parinama and its investment thesis? What are the sectors or solutions that Parinama is looking to invest in, in India, in the near-term? How are you assessing these sectors, in terms of return expectations, gestation periods, challenges in establishing scale and other critical factors for an investment thesis?
We have been working with the Indian Government to build the Indian Climate Impact Investing Ecosystem (ICIITE) which is intended to underscore the importance of building an ecosystem around impact investing in India, for climate-related innovations. We believe that with climate investing gaining focus the world over and with India’s diverse and burgeoning economy, a compelling case for international investors, including family offices, who seek investment opportunities with the potential to create a positive impact, and assist in saving and changing the entire look of human existence, must be foremost in decision-making. If we do not allocate capital adequately in scale, and accurately in scope and area, then our ability to arrest and reverse climate change will be effectively negligible.
ICIITE is an ecosystem, we believe the largest of its kind, which caters end to end from tech inception to mass scaled usage, and is the product of significant, consistent collaboration between the GoI and private stakeholders including academia, corporate/business entities, DFIs, FOs, VC funds, and other relevant stakeholders depending on the sector that we are looking to launch a new tech SPV in.
The entire premise that the ICIITE ecosystem has been developed on, is that this will be the only ecosystem, where a dedicated team of public-private entities (Parinama on the private side, and Bharatia as a Government Foundation) are focused on investing in the “first commercial demonstration project,” a stage in the life cycle of a new technology that no other fund or venture investor is focused on, and is one of two of the largest risks to the success or failure of a new venture.
Prior to entering into this stage, however, we have worked to de-risk and validate all the technologies that are being considered to develop, deploy, and scale to provide positive impact and mitigate specific climate change and environmental problems. Each technology is passed through the ETV (Environmental Technology Verification) program, which was developed over a decade of bringing and verifying the usability and adaptability of new technologies into the River Ganga Rejuvenation Project.
Parinama and Bharatia work hand in hand with the most experienced and knowledgeable sector specialists from the IIT and other university networks, and developed the most advanced tech validation and sector-specific standardized due diligence program. We take a developmental approach, which means that tech is not discarded or rejected if it holds promising potential in addressing an inventoried list of climate issues that require addressing at certain times, in different areas, etc. Instead, we add value to the tech by building up the missing management capabilities of tech companies that historically prevent them from scaling.
As of the announcement of the ICIITE ecosystem at the G20, there is a “warehouse” of over 60 verified technologies, that we will be rolling out one at a time for the next 12-18 months to stress test all aspects of the venture building strategy and partners we have put together, and aim to accelerate the scaling of these technologies with Parinama seeding each new tech, alongside the Government, our academic partners and select industry partners, either in the form of financial capital, or with land, technical manpower, equipment, and facilities, as well as other necessary resources to any start-up looking to scale. The aim is to fund the first commercial pilot, build an order book, and then when revenue is either already being generated or contracts signed, look to raise a Series A within 12 months of the seed funding provided by Parinama. At this stage, Parinama would sell an amount equivalent to the initial investment made to scale from pre-seed to Series A and recycle this back into the next technology to be brought to market.
How this differentiates what we do versus the rest of the early-stage investing universe is that firstly we have a full pipeline of tech for which we sign ROFRs with Bharatia, which in turn allows us to establish a flexible, robust, and highly scalable base from which to raise funds for the specific tech start-ups coming through the ETV and ICIITE. Additionally, given our proximity to the market, we can select technologies that are required more urgently today to generate a positive impact, or are required as precursor set up tech platforms for more sophisticated, second iteration technologies that will be required ~5 years from today.
The fundamental motive of our thesis is that the impact must be generated, and the time when financial returns are made is essentially irrelevant, as by definition positive impact which mitigates and reverses climate change issues will create and drive new markets, products, industries and thereby generate, we would contend, outsize returns for those willing to take a 20-25 year investment horizon and manage risk on this basis.
It was with this intent that we translated our experience into setting up a new form of investment entity, focused on climate-aligned solutions and looking over a longer-term investment horizon and deploying patient, higher risk tolerant capital. We look at building climate-focused enterprises across multiple segments such as waste management, electric mobility, resilient agriculture, etc. with capital across stages. We see this capital helping to create a scalable impact across the climate ecosystem while generating returns in parallel.
Simply put, Parinama has one primary goal – To successfully and rapidly bring to market high-ESG impact climate technologies utilizing India’s intrinsic strengths and establishing India as THE place for the world to come to and find solutions to problems faced by the entire human race and our ONLY home, Mother Earth being at risk.
India’s diversity, size, economic growth, and economic split, all combine in a manner that can allow India to be in the prime position as a global climate leader in policy & strategy for the next 20+ years plus be THE Climate Hub for Asia & all developing nations.
India is the only developing country with:
- Domestic ability to build and scale rapidly.
- Rich scientific excellence to validate, verify and ensure that the new-age techs deliver what they claim, but is also indigent, affordable by the poorest of humanity.
Together with the political will as the world witnessed during India’s leadership of the G20. A continual track record of innovation plus entrepreneurism and a culture of always finding a way to achieve what we must – to create new markets for highly impactful tech that will, as a part of a focused approach, serve to arrest and reverse climate change so we can close to meeting the UN 2050 Climate Goals. Stakeholders willing to look at Long Term investment horizons, which losses as we iterate tech, but goal is value and impact-driven and not pure financial return.
Q3: Could you share a little of your experience and findings that led you to carve out a separate fund out from a family office? It will help our readers build visibility on the possible ways through which private capital could be mobilized for climate. Family offices both in India and international markets are gradually becoming open to investing in emerging asset classes, with investing for impact, increasingly capturing their attention. Given you have experienced the role of a family office and now of a related direct investor, in your experience, how has the perspective of family offices towards impact investing evolved in recent years? How can family offices be inspired to participate towards investing not just for commercial returns but also for sustainable impact?
Over the past decade, it has become increasingly clear that the desire to move first, to take risks and be flexible and open to new ideas has increasingly been an action affected by family offices and HNIs. This group of investors, although still a minority in terms of assets invested, are the ones driving impact investing forward, and strongly supporting the innovative, transformational technologies and strategies that are required to solve the most urgent environmental and social challenges plaguing humanity the world over.
As concerns about climate change, social inequality, and environmental degradation continue to escalate, more investors are seeking ways to align their investment portfolios with their values and contribute to positive social and environmental impact, and no group has moved more quickly to the front lines of impact investing than private investors and family offices. These investors have allocated capital to a broad array of potential solutions, which serve to provide as diverse a range of impact types and financial returns as the people making these more holistic investment decisions, and which have in many ways, laid the tracks for large-scale institutional capital to follow. The reasons for the prevalence of family offices being the drivers of impact investing are well discussed, but bear running through, as the importance of these reasons ebbs and flows as economic cycles occur. An increased consideration of environmental, social, and governance factors, innovations in technology and a next-gen-driven desire to do better for the world are seen as the prime motivating factors for family offices increasing their commitment to sustainable investment, a trend that is only expected to accelerate as we draw closer to the line in the sand that is 2050, and the need for drastic solutions becomes more urgent.
Perhaps most crucially, impact investing strategies provide a much broader universe of investment opportunities, primarily because they are seeking to address issues that have become literally planet-threatening in the last two decades or so. As a result, new products, new markets, new methods, new sectors, and new methods of production and trends in consumption have risen, bringing with them a multitude of untapped opportunities.
With a more powerful voice coming from next-gen members of generational family businesses, particularly in contrast to the norm in Asian societies, the adoption of long-term investment horizons has become more commonplace, simply because it is this current next-gen and the one which will follow that will be most affected by humanity’s ability to materially impact and negate climate change and all the associated environmental, social, biodiversity, and planetary issues.
This realization, and the very real possibility of the end of humanity if certain targets aren’t met, or certain boundaries crossed irreversibly, has galvanized many of my next-gen peers to use all the advantages at our disposal – lengthy business history and expertise, relationships established over generations, the ability and indeed desire to collaborate with our peers to do all we can for the bottom half of the global wealth pyramid, and are most devastatingly hit by climate and related issues but lack the ability to find or finance solutions for themselves as they focus on living day to day in many cases. This is where family office value systems are brought into the decision process so that areas that investors care about and are in need of impactful investment, will receive the required attention.
Finally, this capital is both long-term focused, as FOs generally focus on continuing the family legacy and do better than their antecedents, and create a better world for descendants comes into play – FOs will be willing to adopt a higher risk tolerance, and invest through multiple iterations of investment boom and bust cycles, learning and improving within their chosen area – be it the traditional family business lines, or in new industries and technologies that are developed to mitigate climate change effects in specific areas.
Investing in the climate ecosystem often involves projects and solutions with longer gestation periods as compared to what the market has been traditionally accustomed to. While profitable and investable opportunities exist in the new-age climate innovations, they often require capital that is flexible and patient, unlike a conventional Venture Capital Fund cycle. Hence the capital from family offices positions as a catalyst for the investable opportunities within the climate ecosystem which underscores the imperative for patient capital.
We believe that established Indian corporates with their streamlined value chains, market capture, and capital availability, hold great potential to support emerging enterprises with scalable, sustainable, and impactful solutions to develop their strategy and reach the right markets. Our experience with engaging in multiple promising businesses demonstrated the need to create and nurture an ecosystem that facilitates the growth of climate-positive solutions.
However, the main issues that must be resolved quickly, and is something that Parinama is acutely focused on, is the standardization of data so we can accurately, in real time, manage and measure impact being created. Relatedly, we will need to start collaborating and cooperating both within stakeholder groups, and across these so we can garner an accurate picture of where, not just in India, but on a global basis, we are making a significant positive change with capital invested, and where we need to allocate capital to make up where we have fallen behind scientific benchmarks which serve to get humanity and the earth through the climate crisis and into a new, sustainable, just and less self-centered form of existence.
In order to accomplish this within ICIITE and across all sectors in India, Parinama is developing a centralized, bespoke IMM system which will be linked to all our SPV launches, create syndicates of stakeholders (DFIs, Foundations, VC and PE funds, global institutions and corporates that share the same philosophy and values as ICIITE is built on – long-term focus, collaboration and cooperation, operating with transparency and integrity, open and free information sharing globally and a single-minded commitment to put financial returns in the back seat for the next 25 years to give the human race our best possible chance of surviving the largest existential crises our species has ever seen. And we will use our ecosystem partners to expand the mission and vision we share to those that aren’t on board yet.
The crux of the issues we are staring into the abyss to see, is that the outcome of the fight against climate change is binary – either all of humanity emerges better, or we face the end of our species. That is a fact and is not given sufficient attention, perhaps in order to control and quell panic in the mass populace. But just as FOs and HNIs will try and lead, each individual will need to change the way they exist in the world today by making decisions on purchasing, consumption, production, etc. How we motivate those who choose to stand on the sideline will be a crucial process, and one we need to start to focus on soon.
All rights and credits for this publication are reserved by the Indian Impact Council.
