Northern Arc, a non-banking lender based in Chennai, has raised $65 million for its first climate fund. This includes $50 million from the United States International Development Finance Corporation (DFC) and $15 million from OeEB, the Development Bank of Austria. The fund will operate from GIFT City and will provide debt financing to companies in areas like solar energy, energy efficiency, green buildings, and sustainable agriculture. Justin Andrews, DFC’s acting vice president, stated that this funding supports small and medium-sized businesses that are working on climate solutions through innovative technology.
This climate fund represents Northern Arc’s entry into focused climate financing. It aims to support businesses that are innovating in the circular economy, water management, and adaptation technologies. Ashish Mehrotra, managing director and CEO of Northern Arc, mentioned that by investing in green projects across various sectors, they hope to promote sustainable development.
Bhavdeep Bhatt, CEO of Northern Arc Investment Managers, emphasized the need to fund climate-focused small and medium enterprises (SMEs) for sustainable practices at the grassroots level. Many SMEs struggle to find the necessary funding, which underscores the need for specialized financial approaches.
This fund launch follows Northern Arc’s recent announcement of Rs. 1,500 crore ($178.5 million) alternative investment fund. Northern Arc Investment Managers has successfully completed and exited four funds with returns higher than expected.
Since its founding in 2009, Northern Arc has arranged financing of over 1.9 trillion INR across 686 districts in India, helping over 11 crore people. The company focuses on various sectors, including microfinance, vehicle financing, and affordable housing. It has notable investors like IFC, Sumitomo Mitsui Banking Corporation, and LeapFrog.
As of September 30, 2024, Northern Arc manages assets totaling Rs. 15,121 crore, with successful fund exits yielding net returns between 11.72% and 15.77%. This investment comes as venture capital firms increasingly support climate technology, reflecting heightened activity in the sector. Recently, Avaana Capital closed its climate fund at $135 million, surpassing its initial goal. Meanwhile, SIDBI obtained $24.5 million from the Green Climate Fund for its first sustainability fund in March, and NOW launched a $2 million fund for early-stage deeptech startups that same month.