Sandiip Bhammer, Co-Managing Partner and Founder of Green Frontier Capital (GFC), recently sat down for an interview to discuss the motivations behind starting the fund and the potential for measurable climate impact through investments in India’s economy.
Sandiip has over thirty years of experience on both the sell-side as well as the buy-side. He holds an M.B.A. from the Cornell Johnson Graduate School of Management, and an M.Sc. (Finance) and B.S. in Business Administration from Boston College’s Wallace E. Carroll School of Management. He also serves on the Advisory Board of the Emerging Markets Institute (EMI) at Cornell University, which provides thought leadership on the role of emerging markets in the global economy. Sandiip is also an Honorary Member of Meaningful Business, a global community of leaders combining profit and purpose to help achieve the UN Sustainable Development Goals. He is a recent recipient of the 2022 MB100 Awards, a program supported by EY and Hogan Lovells, and designed to help achieve the UN Global Goals.
A Green Investment Strategy for India
India, after China and the United States, is the largest greenhouse gas emitting country in the world. While the US is currently at the forefront of addressing and, undoubtedly, driving the narrative on climate change (including mitigation, adaption, and resilience), the US will find it an uphill task to deliver any tangible progress without the involvement of India and/or China in the equation. China, with its strong focus on growth, has been slower to address climate change (owing to legacy issues which cannot be overturned rapidly), while India’s economic development has only taken place gradually and over the last thirty years with fewer legacy issues than China. Therefore, India presents a unique opportunity in that the country can pivot much more rapidly, and importantly, at scale, from a “brown” economy into a “green” one, with the help of impact-focused investors like Green Frontier Capital, with Sandiip at its helm.
Sandiip is optimistic about the potential for India to lead the way in addressing climate change through investments in climate mitigation and climate adaptation opportunities, and believes that the next decade, or possibly two, will belong to this cause. With billions of dollars expected to be poured into India (with an estimated climate finance opportunity globally of $50 trillion dollars), the country is extremely well positioned to deliver tangible and measurable progress and serve as a role-model for other countries in the Southern Hemisphere.
By focusing its investments on “green”, India-centric business with large customer-facing markets, accompanied by massive disruption potential, Sandiip believes that Green Frontier Capital can be at the vanguard of this opportunity. When discussing “green” focus areas within India for investments, Sandiip mentioned that:
“Energy transition, for example, is a very big piece of the climate change opportunity globally. But for us as an investor, we’re de-prioritizing energy transition as an investor because there’s greater government involvement and cross-border political sensitivities around energy transition – and, as we are all aware, policies can change rapidly in the face of global market conditions and the largest incumbents have significant clout to impact policy. We would rather invest where the low hanging fruit is around Foodtech/Agtech/Mobility/materials, all areas where government involvement through policy making is deminimus and yet, where the impact is truly meaningful and measurable.
If you look at greenhouse gas emissions in India, 45% of the greenhouse gas emissions actually occur from what is grown, how it is grown and how the population travels so we would rather focus our portfolio construction around the FoodTech, Agtech, and Mobility sectors – where we are finding enough great startups engaging in exciting and breakthrough innovation and in which the foundational technologies being worked upon are capable of displacing their fossil-fuel counterparts/incumbents from both, a price as well as performance, perspective.”
So, instead of focusing on energy transition, GFC is prioritizing sectors where the impact is meaningful, measurable, and disruptive – and yet less politically sensitive. By investing in these areas, the fund hopes to not only deliver the required impact from a climate-change perspective but also deliver venture scale returns to its investors.
When identifying and analyzing startups for investment, Sandiip explained how GFC differentiates itself from traditional venture capital firms. In addition to looking at traditional metrics like total addressable market (TAM), cash flow projections, and founding team – GFC also evaluates potential investments based on the scale of impact of those investments on climate change and the measurability of that impact.
“If there isn’t an industry that is capable of sequestering at least 5 gigatons of carbon dioxide by 2030 or 10 gigatons of carbon dioxide by 2050, does it really make sense to invest in that industry? After all, climate change is a pressing issue, and we need to address it now rather than over the long-term.”
In addition, in the mobility space, GFC looks at metrics like the number of zero-emission kilometers enabled by a company or the amount of conventional fuel saved by its activities or products. In the agriculture and Agtech space, GFC considers metrics like the amount of water saved or kilograms of chemicals not used, which are both hallmarks of Controlled Environment Agriculture (CEA), a sector which GFC has invested in and is exposed to in India. GFC also requires its investee companies to provide monthly metrics of their environmental impact so that the fund can track its overall “aggregate” impact as well through its investment activities. When GFC sees trends in reporting (such as deteriorating metrics), Sandiip said:
“We actually go back to our investee company and figure out what’s happening. Why are the metrics deteriorating or slowing down? Is the company doing something different than what it did before? Has there been a policy change? Has there been some kind of growth dynamic that has changed?”
Armed with this data, GFC has really been able to monitor (and potentially drive) the impact that its investments have had. Which makes it so hard to swallow when some investors say that impact investing or ESG investing is “useless.”
“Impact is Recession Proof”
Sandiip noted that when the economy slows down, people will still invest in impact opportunities because impact investing makes the world a better place and that impact companies are typically “recession proof” – especially now with the volatility in the tech markets:
“Yeah sure, you’ll have higher returns in pure tech. If you want to go out and swing for the fences, as many early-stage tech investors do, and then, you know, get out opportunistically – then, sure, complain all you want about impact. But we don’t think of impact like that. We think impact thrives. Its recession proof. In the long term, impact investing will give you better Sharpe ratios as there is the likelihood of lower volatility in impact investing and, therefore, lower volatility in the return profile as there wont be “hot” capital chasing impact opportunities. Because even in times like this, when tech investors or tech companies are finding it hard to raise capital, there is plenty of capital for impact opportunities such as climate-change”
Sandiip also highlighted that investing in ESG companies is not just about making money, but also about making a difference. He discussed how traditional companies in high emission industries, such as BP or Saudi Aramco, are beginning to also invest in green technologies to hedge themselves in the long run and ensure their survival in connection thereof.
“We are now much more conscious as consumers, and we want to do what is well for our planet, for our kids.”
In the Pursuit of Happiness
Rounding out the conversation, when asked for his advice for students looking to break into impact investing – Sandiip stressed considering the long-term stability and satisfaction of working in the industry. He advised them to be prepared for a potentially lower compensation in the short-term but suggested that the intellectual challenge and creativity involved in impact investing can make up for lower monetary compensation. He also noted that impact investing allows for a broader range of opportunities and industries to work in, compared to traditional finance, which he mentioned, with a smile, will lead to greater happiness in one’s career:
“So that’s the advice if you want to be happy, go for an impact-led career.”