Investing in a sustainable future

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May 2010

N°6 - Private equity and clean energy: how to boost investments in emerging markets?

Renewable energies and energy efficiency: Beauty and the Beast

Policies to develop renewable energies and energy efficiency are essential in order to tackle the looming energy crisis. Although least developed countries enjoy real potential, the required transformations are hampered by the scarcity of public and private resources. In developed and emerging countries, renewable energy subsidies create “windfall effects” and despite being more profitable, energy efficiency takes second place to the rush for renewable energies and institutional tools are unable to integrate its specificities. >> Download Éric J.F. Francoz’s paper

The challenges of triggering private investment into the energy efficiency sector

If global targets to reduce greenhouse gas emissions are to be met, it is essential to scale up energy efficiency development. Yet several obstacles prevent investors from getting involved and it is imperative to reduce risks (real or perceived). Although some donor initiatives have been successful, governments must get more involved, for example, by participating in the implementation of risk mitigation instruments and supporting awareness raising campaigns and training. >> Download Philippine de T’Serclaes and Cédric Philibert’s paper

Scaling up private equity investments in renewable energy in developing countries

To attract private investors, returns on renewable energy projects in developing countries must offset the risks that are taken. Incentive policies, promoting loans with affordable guarantees and providing a wide range of banking products can all help the sector to develop. Public authorities could enhance their role as mediators between investors and project initiators. When the context is favorable, the private sector can create innovative business models with a capacity to meet the challenges of renewable energies.>> Download Kirsty Hamilton's paper

Can venture capital funds be a source of investment for clean energy SMEs?

The Multilateral Investment Fund (MIF) finances clean energy projects led by small and medium-sized enterprises in developing countries. MIF’s experience in Latin America highlights some prerequisites for the success of these projects: there must be a favorable regulatory environment, the fund manager must be experienced, the financial tools must be tailored to the context, entrepreneurs must be well informed, etc. Donors, for their part, must fully play their role as catalysts for investment. >> Download Susana Garcia-Robles, Rogerio G. Ramos, and Tatiana Chkourenko’s paper

Investing in clean energy in developing countries: can it pay off?

The two clean energy companies set up by Aloe Private Equity in Asia have demonstrated that investment in clean energies in developing countries can indeed pay off. Whilst Greenko Group in India has surely proven that this high profitability can go hand in hand with environmental and social gains, the example of Longmen in China highlights how important local expertise is. Beyond this, if projects are to be successful, it seems essential for fund managers to have the capacity to get directly

involved in the businesses as one team with management, build local partnerships and comply with a series of key principles. >> Download Jean-Pascal Tranié and Vivek Tandon’s paper

Barriers to private sector investment in the clean energy sector of developing countries

The preparation phase is essential in clean energy projects; it is also comparatively more costly, particularly in developing countries. Investment volumes continue to be insufficient as a result of the transaction costs and the higher level of risk. Moreover, being a “pioneer” in this sector and these countries carries very few advantages – differential costs are, in this case, even higher. Governments and development institutions can help reduce preparation costs, reward “pioneers” and secure a future for the sector.>> Download Duncan Ritchie’s paper

Clean energy investment funds: moving beyond magic formulas to sound risk analysis

Developing countries’ clean energies are attractive for investors, yet there are few specialized local funds. Analytical tools are undoubtedly inappropriate and underrate four specific areas of risk: fund size, management team skills, strategy balance and portfolio liquidity. If investors set out to analyze these risks and managers implement mechanisms to mitigate them, it is likely that the private sector would scale up its investments in developing countries’ clean energies. >> Download Adeline Lemaire and Christophe Scalbert’s paper

Key data

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In this magazine

Éric J.F. Francoz, Agence française de développement (AFD)

Philippine de T’Serclaesand Cédric Philibert, International Energy Agency (IEA)

Kirsty Hamilton, Associate Fellow, Renewable Energy Finance Project, Chatham House

Susana Garcia-Robles, Lead Investment Officer; Rogerio Ramos, Projects Specialist and Tatiana Chkourenko, Consultant – Multilateral Investment Fund (MIF)

Jean-Pascal Tranié and Vivek Tandon, Founders and Managing Directors of Aloe Private Equity

Duncan Ritchie, CEO of Aequero

Adeline Lemaire and Christophe Scalbert, Investment Officers at Proparco

Documentary resources

Publications, studies, articles
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