Larger cheques, sharper focus on climate-tech: BII’s playbook for startup investments in India

British International Investment (BII), in its strategy for 2022-2026, had declared that 30% of its investments would be ringfenced for the climate sector. In India, BII’s investment commitment in the space is over 40%, says Shilpa Kumar, BII’s Managing Director and Head of India. 

BII—the United Kingdom’s development finance institution and impact investor—has been supporting climate-tech firms in India through a variety of routes: as a limited partner on funds, co-investments, and direct investments as well. 

Earlier this month, BII came in as an anchor investor in early-stage venture capital firm Theia Ventures’ maiden fund. The VC firm’s new fund looks to back Indian startups developing technologies to decarbonise critical sectors. 

Recently, BII also committed $75 million in Blueleaf Energy to help scale clean energy infrastructure in India. 

BII, which is owned entirely by the UK government’s Foreign, Commonwealth and Development Office, has been investing in India since the late 1980s, adapting to the country’s changing business landscape and the growth of startups in the country. A key focus for the firm now is renewable energy. 

By 2030, India aims to achieve 500 GW of non-fossil fuel capacity, meet 50% of energy needs from renewable sources, cut total projected carbon emissions by 1 billion tonnes, and lower the emission intensity of its GDP by 45% (from 2005 levels). In the backdrop of these goals and emerging opportunities in the space, BII is looking to make larger investments in the climate-tech and renewable energy market. 

“In renewables, what you really need is large doses of capital to set up power plants. So when we invest, we invest across the value chain. We invest in startups that do generation, transmission, and distribution. And we do this across products, debt, equity, project finance. These are typically larger cheques and get focused a lot in these three areas (generation, transmission, and distribution),” says Kumar, who oversees delivery of climate finance and investments designed to foster inclusive growth.

Kumar, who came on board in April this year, is based out of Mumbai. Prior to joining BII, she was at Omidyar Network India, a social impact investment fund, where she directed strategy and investments as a partner across the areas of responsible tech, cities & climate, and inclusive property initiatives. She also led policy work in financial inclusion. 

Another major segment that BII is investing in is clean mobility. The company has directly invested in startups including commercial EV maker Euler Motors and charging infrastructure companies such as ChargeZone (charge point operator) Battery Smart (and battery-swapping player).

BII invests about $2 billion annually in the markets of Africa, Asia, and the Caribbean. Of this, $600 million to $700 million is deployed every year in India. 

Shilpa Kumar (L), Managing Director and Head of India, BII, and Priya Shah (R), Founder and Managing Partner, Theia Ventures

Partnerships and co-investment 

The firm invests in ideas that closely align with its development goals, focusing on sectors such as green infrastructure, technology, and climate finance, and in companies that contribute to economic and social development in emerging markets. 

According to Kumar, the firm invests in startups by working with VC firms that have expertise investing in these sectors. 

“In most of our startup bets, we prefer to go and look out for a pair of safe hands (VC firms) that know the companies or the sector very well and who have been investing in the sector and have a good track record of supporting innovation (in this space). We then work with them to support their investments and work with these startups to help build some of these businesses better.”

To date, the firm has allocated $193 million across 19 funds, which include 3one4’s Fund III, Aavishkaar India Fund VI and Blume Ventures India Fund IV, according to its website. 

BII also has a co-investment strategy. This means that the firm invests directly into a company alongside a VC firm, while also being a limited partner in the fund. 

“We look at how the company is tracking. Why does it need the capital and what does our fund partner think about it? Apart from these very basic questions, we also see if it meets our basic investment criteria: how is it affecting our impact footprint?” says Kumar. 

For each investment that BII makes in the climate-tech space, it assesses the measurable social and environmental outcome the investment will generate. 

In October, BII committed $75 million in Blueleaf Energy to help scale clean energy infrastructure in India.

Future investment strategy

BII is looking to double down on companies in electric mobility, renewable energy, agriculture, and the circular economy. Going forward, the firm is looking to make more direct investments into companies in these spaces. 

Kumar notes. “We want to build out various parts of the subsector with direct investments. Because the difference between a direct investment from us and a fund investment is that the direct investment would mean a much larger cheque from us.”

The firm is also looking to make growth-stage investments in startups and is examining suitable VC partners for the same. 

There is currently a dearth of growth-stage capital in the climate-tech space. However, according to Kumar, this is slowly changing. Many sector-agnostic VCs are now eyeing the action in India’s climate and energy landscape to make growth-stage investments. 

“A lot of people, some of whom have had such good bets on the fintech and SaaS side, are now thinking that it’s time to focus on climate.”