Leading diversified non-banking financial services company in India, Northern Arc has announced its maiden Climate Fund through its fund management arm, Northern Arc Investments IFSC Trust.
The climate fund has secured $65 million in debt commitments including $50 million from the United States International Development Finance Corporation (DFC) and $15 million from OeEB, the official Development Bank of the Republic of Austria.
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“DFC is proud to support Northern Arc in advancing sustainable development initiatives in India. This transaction aligns with DFC’s goal of expanding financing for small and medium sized businesses that are promoting climate mitigation action and resilience through innovative technology including in the energy, agriculture, and e-mobility sectors,” said Justin Andrews, DFC's Acting Vice President of Small Business & Financial Services.
Northern Arc is a diversified lending, placements, and fund management company that has financed over INR ~1.9 trillion to empower over 111 million Indians. As of September 30, 2024, Northern Arc's balance sheet and active AIF funds manage INR 151,210 million. Northern Arc has had 6 successful fund exits with net fund returns of 11.72%-15.77% post-expense pre-tax without delays or defaults.
OeEB, the Development Bank of Austria, has implemented more than 500 projects since its foundation in 2008 and places a particularly strong focus on climate financing in its strategy cycle 2024 – 2028.
“Supporting India’s sustainable transition is essential for the global fight against climate change, and the expansion of renewable energy is of central importance for the country’s continued economic development. Therefore, OeEB is planning to contribute $ 15 million to the climate fund, and we are looking forward to working together with Northern Arc”, says OeEB’s Member of the Executive Board Sabine Gaber.
Located in Gujarat International Finance Tec-City (GIFT City), the climate fund will provide debt financing to businesses in their growth stages that are involved in energy efficiency, green buildings and materials, e-mobility, sustainable agriculture, commercial, industrial, and residential solar energy.
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Highlighting the strategic importance of this initiative, Ashish Mehrotra, Managing Director & CEO, Northern Arc said, “The significant investment from DFC and OeEB reinforces our ongoing commitment to revolutionize climate finance as well as transform the financial landscape for all households and businesses in India. By channelling these funds into green projects across our focus sectors of MSME, Affordable Housing, Vehicle Finance, Agriculture Finance, Microfinance and Consumer Finance, we aim to create a cascading effect that promotes sustainable development. Our deep sectoral expertise allows us to effectively manage a diverse portfolio, while our strong risk management philosophy ensures the protection of investor interests, all with a focus on advancing climate finance solutions.”
It will also highlight companies that are developing adaption technologies, the water sector, and the circular economy in an effort to lessen their influence on the environment and foster long-term resilience.
On the significance of global partnerships for its maiden climate fund, Bhavdeep Bhatt, CEO, Northern Arc Investment Managers, said, “For net zero to become a reality, there is a need to fund climate-focused SMEs to promote sustainable practices at the grassroots level. However, the SMEs often struggle to access sufficient growth funding, highlighting the need for tailored underwriting approaches that consider their unique value propositions and financing needs. As climate change intensifies, the urgency to channel more capital toward these climate-driven enterprises becomes even more critical. Our maiden Climate Fund is uniquely positioned to bridge this gap. Leveraging our fund management platform and expertise in climate finance, we are committed to enhancing access to growth capital for these SMEs. We extend our gratitude to DFC and OeEB for sharing our mission and supporting us in enhancing access to finance for these businesses.”
About Northern Arc
Powered by technology and data, Northern Arc offers a suite of solutions including lending, placements, and fund management in key sectors like MSME Financing, MFI, Consumer Financing, Vehicle Financing, Affordable Housing Financing, and Agricultural Supply Chain Finance.
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