Green Ventures launches $300 mn carbon fund

With the growing attention on climate change and perceptible impact of global warming, the launch of Carbon funds is the order of the day.

The latest to join the bandwagon is Green Ventures International, with its $300 million India Carbon Fund I.

The fund happens to be the first of its kind in India. It will buy CERs (carbon emission reductions) or carbon credits from companies operating under CDM (clean development mechanism) and then sell them to buyers in Europe.

On the other hand, most green funds generally invest in clean-tech companies. The fund has a five-year duration and the LPs (limited partners in the fund) are mostly institutional investors and fund of funds (FoFs) from the US.

The Indian LPs have not been roped in, according to Vinay Bharthwaj, director, Green Ventures India, as "there is hardly any awareness in India about such funds and the carbon credit market. So it is better to have informed investors".

However, the fund is in talks with some well-known wealth management companies in India for future investments. It is expecting a return of 25 per cent from this fund and plans to launch another billion dollar fund focussed on the Indian market.

Green Ventures is an emissions commodity asset management company based in New York.

Apart from managing carbon funds, the company offers environmental engineering project advisory services to companies that have an interest in the financial and environmental benefits accrued by managing emissions.

The industrialised countries have to reduce their collective emissions of greenhouse gases between 2008 and 2012, under the Kyoto Protocol.

One of the ways of lowering emissions is by buying carbon credits from projects set up in developing countries.

A project is eligible to sell one credit if it reduces a tonne of greenhouse gas emission.

Carbon Credits, like any other financial instruments, are likely to be traded in the futures and spot market. Although the price of a carbon-credit would be dependent on the demand-supply situation, its value could range from 20 Euros to 100 Euros.

Green Ventures helps the project developers by providing consulting services in return for the right to purchase resulting CERs. It does the entire documentation for the project, besides getting UNFCC and host country approvals. In exchange for these services, Green Ventures becomes a partner and could sometimes even hold an equity stake in the project.

The investment management company recently bought a wind farm in Tirunelveli and is developing a hydro power project on the Indo-Nepal border. It is also exploring tie-ups with sugar and thermal power companies that have resorted to clean development.

Bharthwaj said, "The carbon credit market in India is too fragmented. India is losing out to China in terms of carbon credits generated annually because the latter is a government regulated market, whereas we have carbon brokers in India. There is lot of negotiation and bargaining, which weans off overseas buyers."

Though India has one of the largest CDM projects registered under UNFCC (United Nations Framework for Climate Change), 51 per cent have not been able to sell CERs. Moreover, the projects in India are small compared with China, thus generating lesser number of carbon credits.

The fund currently has a 15-member team consisting of environmental engineers and MBAs scouting for suitable projects.