Encourage Capital, a New York City-based asset management firm focused on generating compelling investment returns and social and environmental impacts for its investors, has announced the initial closing of a $40 million private equity solar fund.
The Encourage Solar Finance fund will provide growth capital to specialized financial institutions in India working to develop and scale commercial rooftop solar finance solutions for micro, small, and midsize enterprises (MSMEs). Investors in the fund include KfW, Capricorn Investment Group, the John D. and Catherine T. MacArthur Foundation, the Jeremy and Hannelore Grantham Environment Trust, and the Sant Foundation.
While the Indian government has set a solar capacity target of 100 gigawatts by 2022, including 40 GW of rooftop solar, as of March 2019 only 3.5 GW of rooftop solar had been installed — with the MSME market largely unaddressed. With a target of $75 million and a hard cap of $100 million, Encourage Capital hopes to officially close the fund in the fourth quarter of 2019.
"With increasing energy demand, high electricity prices, and decreasing costs of solar, MSMEs can find rooftop solar to be an attractive low-carbon solution for their electricity needs, but financing is still a key barrier," said Encourage Capital managing partner and chair Adam Wolfensohn. "Our fund aims to address these barriers by partnering with specialized financial institutions and providing them with growth capital and the operational assistance they need to develop and deploy innovative and commercial financing solutions to scale rooftop solar for this market."
"MacArthur's investment in Encourage Solar Finance represents a core element of our support for India's climate leadership, and in particular the government of India's bold nationally determined contribution to the Paris Accord in 2015," said MacArthur Foundation director of climate solutions Jorgen Thomsen. "Encourage Solar Finance is targeting a critical financing gap around rooftop solar in India's MSME sector because they believe, as do we, that these transactions are both economically viable and present enormous promise. We're excited to partner with them in this important endeavor."