Strategy for establishing a Venture Capital Fund for GHG Reduction Projects in China (2004)

Businesses in China engaged in development of products or services that promote energy conservation and efficiency, use of clean and renewable energy resources, or both, cannot find sufficient financial resources due to certain systemic factors. The project addressed these systemic by designing the Fund, initially conceived as China’s first venture capital fund dedicated to financing businesses engaged in commercial EE, renewable energy and clean energy business activities.

Specifically, the Fund design was intended to help overcome: 1) A lack of access to financial resources, particularly equity investment and follow-on commercial bank loans, needed to improve EE; 2) Lack of awareness among Chinese SMEs regarding both the cost benefits associated with EE and the means to achieve it; and 3) General lack of familiarity in China with market-driven approaches to efficiency improvements due to the country’s legacy of being a planned, rather than market economy.

The Fund was designed to be a source of equity investment that can enable SMEs to pursue energy related business ventures that are profitable and furnish meaningful environmental benefits in China.

Services Provided: 1) Assisted in the structuring of a venture capital fund to invest in projects in China that would reduce GHG emissions; 2) Worked with UNIDO staff, a venture fund manager, two NGOs and representatives of the governments of Shanghai and Beijing to identify alternative fund design and management options; 3) Defined potential investment opportunities; and 4) Assessed the options for technology transfer from Western countries to China to help reduce carbon emissions.

Funding Agency/Client: UNIDO