Aavishkaar Capital and KfW launch $250 M ESG Fund

The ESG First Fund will invest in mid-cap businesses in Africa and Asia, helping them meet ESG goals for access to European markets.
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Mumbai-headquartered impact investing arm of Aavishkaar Group, Aavishkaar Capital has announced the launch of a $250 million ESG First Fund with German investment and development bank, KfW. The fund will focus on investing in Asia and Africa to strengthen the Environmental, Social, and Governance (ESG) practices of mid-cap businesses and offer them growth capital for expansion.

The fund will provide transformational capital to businesses to improve their ESG standards and meet increasing demands on corporate due diligence especially for access to European markets, said a statement issued by the group. 

“Our focus is to help businesses scale by allowing them to participate in the significant growth of consumer demand for ‘socially-conscious products’. We will support our partners to develop stronger ESG standards and share the benefits of our south-south leanings,” said Ashish Patel, Managing Partner, ESG First Fund of Aavishkaar Capital in the statement.

He further added, “Additionally, our investment approach of providing flexible solutions across the capital structure will help businesses which may not be ready for an all-equity or all-debt solution, or where shareholders may not wish to dilute.”

Founded in 2001 by Vineet Rai, Aavishkaar Group caters to the capital needs of entrepreneurs during their lifecycle through its multiple business arms. It invests capital in the business through microfinance, equity investing, debt and investment banking channels through Aavishkaar Venture Capital, contributes consulting and knowledge expertise through its Intellecapvertical and helps businesses scale through development platform, Sankalp. The Aavishkaar Group claims to have over $1.2 billion in Assets Under Management at present. 

It recently raised $37 million from FMO, Dutch Entrepreneurial Development Bank in 2019 to expand its business to Africa and South-East Asia. 

The German Federal Government-backed KfW Development Bank supports programmes and projects in developing countries and emerging economies. 

"We believe in the ability of purpose-driven, responsible capital to be transformative while creating attractive investment returns. This fund aligns with our focus on ecologically-conscious sustainable businesses that bring in financial inclusion and economic development, and will help us reach businesses globally that are impactful,” said Dr Jan Martin Witte, Director of KfW in the statement. 

ESG and sustainability has seen an increased focus, with venture capital funds looking to apply ESG criteria in their investments, with such investments likely to rise in the coming quarters, said a recent KPMG report.

Edited by Saheli Sen Gupta

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