Climate Finance: The Global Shift Towards Sustainable Energy

The Paris Agreement was adopted by 193 countries and EU in 2015 to “pursue efforts” to limit global temperature rises to 1.5C, and to keep them “well below” 2C above those recorded in pre-industrial times with each country setting its own emission-reduction targets, reviewed every five years to raise ambitions.

A key goal of the agreement was also for richer countries to help poorer nations by providing funding, known as climate finance, to adapt to climate change and switch to renewable energy, evidencing the need for large-scale investments for a phased, orderly transition.

Global Energy Transition Investment

Since 2015, the world has invested more than $1T annually, in energy transition, reaching $1.75T in 2023. Our investment in renewable energy has doubled from c$330B in 2015 to $660B in 2023. A more interesting segment, however, which has 10Xed in 5 years, is electric vehicles, with investments growing from c$14B in 2018 to c$130B in 2023. 

While the 75% growth over 8 years is promising, it is not enough. Estimates suggest that we need 3X the current scale of annualized investments over the next decade to reach our climate goals, with 2X more investments required in renewable energy and 3X more in electrified transport.

The Indian Scenario

Since 2020, the Indian government has consistently claimed to be on track to achieve the goals it set out in fulfilment of its obligation per the Paris agreement which included 4 lofty targets:

  • India will increase its non-fossil-fuel energy capacity to 500 gigawatts (GW) by 2030.
  • India will meet 50 percent of its energy requirements from renewable energy by 2030. 
  • India will reduce its total projected carbon emissions by 1 billion tons by 2030.
  • By 2030, India will reduce the carbon intensity of its economy by 45 percent.

Estimates from IFC suggest that this will require investment upwards of $10T by 2070, for India to reach its “Net Zero” commitment.

With 75% of India’s emissions originating from energy use, investments in the production of renewable energy and consumption via electrification of transportation are two critical segments that need significant capital investments.

Financing Energy Production: Rooftop Solar

The Indian government has focused aggressively on rooftop solar, which generates 11 GW of electricity, with an ambitious target of 40 GW of electricity set for 2026.

Despite significant savings from a near-zero levelized cost of energy from solar and payback periods of under 5 years, the upfront installation cost remains prohibitively expensive for businesses and individuals alike. This has resulted in a slow uptake with the government having to push the initial 40 GW target to 4 years later.

A 3 kW set-up requiring 300 sq ft of rooftop space necessitates an expenditure of more than INR 1.2 lakhs. The payback period for a similar set-up at INR 6 per unit electricity cost is c4.5 yrs post which the the consumer only has to incur minimal maintenance charges for the setup.

Is financing not accessible for solar projects? Yes and no – while there is a strong push from the government, with low-cost finance made available by many banks and NBFCs through their schemes, access to such financing remains low.

The biggest barrier for MSME clients is a perceived lack of creditworthiness due to lack of credit information/ratings. This is further aggravated by the high transaction cost/time of MSME rooftop loans due to their small size, decreasing their attractiveness to lenders. Similar challenges combined with an inability to manage complex paperwork and understand structural requirements for rooftop solar compound the problem for retail consumers.

The principal argument against their poor creditworthiness for solar however is that electricity is a core raw material that MSMEs consume and have consistently paid for; a similar argument could be made for any retail consumer who would certainly undertake the installation of rooftop solar if the procurement and installation process could be simplified.

The opportunity for startups therefore lies in transforming this cash flow from an expense line item to a finance line item and in simplifying the complex process for both MSMEs and retail consumers.

The two models:

  1. Buy Now Pay Later (BNPL)

While the idea of BNPL traditionally brings to mind lifestyle purchases like apparel, accessories, electronics etc., BNPL for solar is a viable financial option that has been demonstrated with a reasonable degree of success. 

Unlike other purchases that may not have a cash flow component, BNPL for solar allows the borrowers to get easy approval for solar financing leading to quicker installation, and converts the fixed upfront cost into easy monthly payments.

Companies like BrightE in Australia have disbursed $1B+ of 0-interest loans for the installation of solar power set-ups. Their customer cohort is typically individuals in their later ages, with good credit scores with the asset delivering a significant sustained value.

While there is no true 0-interest product, with the cost of financing baked into the product, and cash purchases producing upfront discounts, BrightE’s true value proposition lies in its ability to quickly disburse the required capital for solar installation through its partner vendors which solves your installation, financing and maintenance needs together.

  1. Offtake Agreements

These agreements have a very interesting characteristic: they do not alter the typical MSME behaviour of paying for electricity costs, but simply reduce your power bills.

In these models, the financier charges the consumer a pre-fixed rate of electricity per unit which is typically lower than their existing tariff, so the customer sees upfront benefits. The rate per unit is used to pay the negligible variable cost of solar energy production, then the interest on the loan, and lastly the principal on the loan.

Unlike the BNPL model, with a fixed monthly payment – the variable nature of the payments in offtake agreements which are contingent on electricity generated result in a wide range of IRRs which could range which could make management of cash flows a bit tricky for the financier but this model has the added benefit of negligible change in customer behaviour and easier customer education.

While startups may adopt either mode to deliver the financing required, a core requirement of both models, more than the interest charged, is the convenience they offer to both retail and MSME customers, making their decision to transition to solar energy easier and accelerating our transition to production of renewable energy.

Financing Energy Consumption: Electric Transportation

Road transport accounts for 12% of India’s energy-related CO2 emissions and is a key contributor to urban air pollution. To bring the emissions from this sector on track with the 2070 goal, the share of EV sales needs to reach 50% by 2030.

Green shoots of this transition are already visible with TCO for 2-wheeler, 3-wheeler and LCV categories for both personal and fleet use-cases being lower than ICE vehicles.

While the understanding of these benefits of owning 2-wheeler EVs has resulted in significant growth, with EVs already reaching 5% market share of sales in FY23…

… the EV ecosystem is still fraught with challenges.

The principal challenge for EV ownership remains an inability to underwrite the asset, emanating from a limited understanding of battery chemistry, and a non-existent/inactive secondary market for these assets.

For comparison, while on an ICE 2-wheeler, the loan-to-value ratio (LTV) can go as high as 95%, the comparable number for EVs is 80%. The tenor of the loan also ends up being lower, with the average tenor of 3 vs 4 years of EVs and ICE vehicles respectively. The interest rates on these loans also tend to be 1-4% higher.

While many Indian startups are attacking the problem from the problem statement of easier access to finance, and in some cases dealer-level financing to unlock benefits of portfolio diversification, in our view, true value for the segment will be unlocked with investments in the development of a secondary market for 2-wheeler EVs, which will provide assured returns for the assets, improving its residual value, reducing its risk profile for lenders and making it comparable to an ICE vehicle. Asset buyback programs and battery-repurposing schemes are other options that could help catalyze the creation of a secondary market for EVs.

An interesting development in the field is Piaggio’s 3-wheeler battery subscription model which de-links the battery purchase from the chassis, reducing the upfront purchase cost. While these models by themselves may be insufficient given the distribution and the massive scale of financing required, they could help catalyse the development of a financing ecosystem, much like the installation of the first charging stations were needed by OEMs to drive sales of EVs.

Closing Remarks

While we have only looked at two more prominent use cases, i.e. solar energy and EVs to illustrate our case for the requirement of easy financing across consumption and production of energy, our broader view is that in both cases and other climate finance opportunities, it is critical to look at ways and means of meaningfully improving the risk profile of the asset through creation or modification of cash flows to ensure that ample private capital can be mobilized to help us accelerate our transition to a more sustainable future.

If you are building in Climate Finance and wish to speak, please feel free to reach out to us at

Rocketing Ahead: Unveiling India’s Cosmic Quest in the Space Tech Arena

Do you ever find yourself marveling at the uncanny resemblance between reality and the fantastical scenarios portrayed in science fiction? If so, prepare to be captivated, for the domain of space technology is currently witnessing a convergence of visionary concepts and tangible advancements that rival even the most imaginative cinematic portrayals!

Consider this: at present, our planet is encircled by over 4500 satellites, with an estimated projection of approximately 2800 additional satellites slated for launch each year in the foreseeable future. This equates to an average of about 8 satellites launched daily—an impressive testament to humanity’s surging presence in the vast expanse of space.

While stalwart pioneers such as the United States, Russia, and China have long held dominion over the realm of space exploration, India, under the astute guidance of the Indian Space Research Organization (ISRO), has emerged as a formidable contender. ISRO’s resounding success in launching missions to celestial bodies such as the Moon and Mars has firmly established India’s position as a significant player on the global stage.

In a strategic initiative aimed at fostering private sector participation in space endeavors, the Indian government has introduced the Indian National Space Promotion and Authorization Center (IN-SPACe). Serving as a facilitator and regulatory body, IN-SPACe endeavors to empower private entities through technology transfers, financial assistance, and access to testing infrastructure—an attempt to catalyze a vibrant ecosystem of space-related enterprises.

While missions like Chandrayaan and Mangalyaan have undoubtedly captured global attention with their lunar and Martian exploits, the ascent of private enterprises within the space technology landscape heralds a new era of innovation and opportunity.

Furthermore, with the Indian space industry poised to catapult from $8.4 billion to a staggering $44 billion by 2033, the trajectory of growth appears nothing short of astronomical. This exponential surge underscores the transformative potential inherent in space-related ventures.

Space Tech Industry – Addressing every link in the chain: 

The industry is delineated by IN-SPACe into key segments of: access to space, space for Earth, and space for space, as outlined below:

  • Access to Space:
    • This segment encompasses the development and deployment of systems necessary for reaching and operating in orbits beyond Earth.
    • It includes the construction of launch infrastructure, the design and manufacture of launch vehicles, as well as the production of associated hardware and software.
    • The overarching objective is to facilitate the transportation of payloads, satellites, and astronauts into space.
  • Space for Earth:
    • Within this segment, space assets and resources deployed in orbit are harnessed to enable a variety of applications and use cases on Earth.
    • Examples include earth observation, navigation systems (such as GPS), communication systems (satellite communication), and weather forecasting.
    • The focus is on leveraging space-based technologies to address terrestrial needs and challenges, thereby enhancing communication, navigation, and monitoring capabilities.
  • Space for Space:
    • This segment involves the development of systems and solutions aimed at enabling and sustaining operations in space itself.
    • It encompasses space exploration missions for research and development purposes, the provision of in-orbit services for satellites (such as maintenance and refueling), as well as activities related to space traffic management and debris mitigation.
    • The primary objective is to support ongoing exploration and utilization efforts in space, while also ensuring the safety and sustainability of activities conducted in orbit.

All these 3 segments have new age players emerging in the Indian ecosystem as mapped below (non-exhaustive):

As per the Decadal Vision unveiled by IN-SPACe in Jan ‘23, following is a view of the key growth segments within space technology:

The most prominent sectors within the space technology industry today in India are navigation and communication, both of which have become integral parts of our daily lives. Globally, companies like Starlink (a division of SpaceX), have already deployed over 6000 satellites in low Earth orbit, with projections indicating that this number could skyrocket to as many as 42000. These satellites provide internet connectivity from space to any location on Earth, a development that has profoundly transformed global communication dynamics.

Amongst the various new and emerging areas in the value chain, we foresee biggest value unlocks by private players in India happening in key areas of: 

  1. Earth Observation:

Earth Observation is projected to become an $8 billion market by 2033, offering significant opportunities for both domestic and international markets. Despite the Indian Space Research Organization (ISRO) launching its first remote sensing satellite in 1988 and currently operating a constellation of around 44 such satellites, their commercial applications have been limited due to constraints in coverage, data capture frequency, and use cases.

However, there is a burgeoning demand for satellite data across various sectors such as maritime surveillance, forestry, border security, insurance, oil and gas, agriculture, and mining. To address this demand, numerous startups have emerged in the Indian space ecosystem, providing customized data solutions tailored to specific industries.

While optical imagery has traditionally been the primary technology for Earth observation, it is limited to capturing images only in daylight and under clear weather conditions. To overcome these limitations, new technologies like Synthetic Aperture Radar (SAR) and Hyperspectral imagery are being developed. Indian startups like Pixxel (specializing in hyperspectral imagery), Piersight (focused on SAR), and Galaxeye (offering multispectral imagery) are at the forefront of developing prototypes and solutions using these advanced technologies.

Although the scientific principles behind these innovations are well-established, the key challenge lies in demonstrating the effectiveness of hardware and software in real-world scenarios. Currently, most players in the Indian space industry are in the process of showcasing their technology through test satellites and data processing. Over the next 3-4 years, these startups are expected to launch multiple satellites, forming constellations that cover key regions of interest for their clients.

The rapid advancement of these startups and their potential to revolutionize Earth observation through space technology applications is generating excitement within the industry. The ecosystem is waiting to witness the young entrepreneurs actually showcasing their technical prowess and unlocking real commercial opportunities.

  1. Satellite and components manufacturing:

Satellite and components manufacturing is poised to become a USD 4.6 billion market in India by 2033. With the escalating demand for satellites for earth observation, navigation, and communication, it is crucial to enhance the upstream value chain of components and manufacturing processes. Reflecting the broader trend of indigenization across industries, particularly in space technology where defense applications hold sway, the government is steadfast in retaining intellectual property, profit pools, and as much of the value chain as possible within the country.

Key subsystems in satellite manufacturing encompass antennas, power electronics, propulsion systems, thermal control systems, sensors, and data handling units. The challenge lies in seamlessly integrating these components to cater to specific use cases while fortifying the supply chain for each. Strategic decisions regarding whether to procure or build each component significantly impact the speed of satellite deployment downstream.

The commercial viability of satellite applications hinges on hardware optimization, driving global efforts towards miniaturization. Innovative approaches include optimized mechanical structures, such as origami-based satellites pioneered by NASA. These satellites are launched in a folded state to minimize volume, subsequently unfolding in space to reduce the size of the satellite bus and lower power and fuel requirements. Additionally, there is a surge in the development of innovative materials for components, capable of withstanding the rigors of launch and space while being lightweight.

In this thriving landscape, startups like Bellatrix and Dhruva Space are emerging as key players in supplying cutting-edge components. Dhruva Space’s announcement of a sprawling 2,80,000 sq.ft. full-stack manufacturing facility in Hyderabad in October 2023 underscores the sector’s growth trajectory. Moreover, a robust network of small and medium-sized manufacturing facilities, long-standing suppliers to ISRO and aerospace clients, is witnessing blossoming partnerships with new-age funded satellite startups. These collaborations underscore the industry’s potential for innovation and growth, positioning India as a key player in the global satellite manufacturing ecosystem.

  1. Launch segment:

The launch segment is anticipated to grow into a USD 3.5 billion market by 2033, comprising satellite launchers and the essential infrastructure for satellite deployment into space. Across the globe, nations, including India, are intensifying efforts to fortify their launch infrastructure in response to the escalating demand for satellite launches.

Presently, there exists a substantial waiting period for satellite launches, with bookings often necessitating advanced arrangements of 6-12 months. This delay stems from the practice of launch vehicles accommodating multiple satellites or payloads, mandating meticulous capacity utilization optimization for economic viability.

Key players in this sphere include prominent entities such as Agnikul and Skyroot, actively contributing to the advancement of launch capabilities. Moreover, there is a prevailing expectation that launch vehicles will undergo miniaturization over time, facilitating streamlined and more frequent launches. This anticipated trajectory is poised to enhance space accessibility and stimulate innovation within the satellite industry.

As these segments expand, we stand on the brink of witnessing a surge in proprietary technology developed by India, benefiting both domestic needs and the global community, thus creating genuine value for all stakeholders.

It’s an opportune moment for entrepreneurs to showcase boundless innovation and cultivate groundbreaking businesses that truly transcend the limits of our world.

Catalyzing Climate Action: Building a Sustainable Future

A sustained 1.5°C temperature increase from pre-industrial levels, staggering economic losses worth $300B+ in 2021, larger than the GDP of ~80% countries like New Zealand, Portugal, Qatar etc. and the increasing frequency and severity of climate disasters, costing over $1B, underscore the urgent need for proactive measures to mitigate climate risks.

Analysis by the ILO suggests that continued global warming leading to heat stress could result in losses of 2%+ of total working time by 2030, the equivalent of 80 million full-time jobs.

Regulators worldwide are pushing for greater transparency and accountability in environmental reporting, with a focus on carbon accounting and the growing demand for carbon credits to offset environmental impact. Organizations globally are incorporating climate risk as a core tenet of their enterprise risk management framework.

In a world grappling with the escalating impacts of climate change, ClimateTech startups present a promising avenue for driving innovation and sustainability.

As global warming trends continue to accelerate, ClimateTech startups are at the forefront of developing innovative solutions to address climate challenges, offering mitigation strategies, transition pathways, and sustainable technologies to combat climate change and build a more resilient future.

Amidst a competitive landscape, Indian startups have a unique opportunity to carve out a niche in the burgeoning ClimateTech sector. By leveraging local expertise, fostering innovation, and embracing sustainability principles, Indian startups can position themselves as key players in the global fight against climate change.

Through this thesis, we want to share our investment framework on the ClimateTech startups we wish to partner with and we humbly offer our limited perspective of what we believe are important elements to build ClimateTech “enterprises”.

If you are building in ClimateTech and want to brainstorm/fundraise, please reach out to us at