2012-01-25

Co.Exist

A VC Accelerator To Back Sustainability In The Developing World's Economy

The world’s emerging economies are surging, but when economies surge, they tend to use a lot of resources. And we’re a little light on resources these days. New Ventures is trying to buck that trend, investing in small businesses that could help leapfrog the developing world directly into a clean economy.

The next century of economic growth is headquartered in emerging economies. Without careful planning, however, that growth is going to take a lot of resources. But creative financing could put these countries on a different development path than the one traced by the fossil fuel-powered industrial revolution. The developing world needs a green venture capital firm.

One of the first major attempts has been the World Resources Institute’s own green network of enterprise acceleration centers, New Ventures. Most of the big foreign investment funneled to the developing world today is preoccupied with massive clean-tech industries such as solar and wind, or globalized sectors such as agriculture and manufacturing.

Yet an enormous pool of small, promising firms are waiting for investment. Without a reliable financing model and (even more importantly) business training, few will ever grow beyond their local niche. New Ventures gives them both.

New Ventures funds sustainable business in places like Mexico, Brazil, and Indonesia. Its profitable thesis has reportedly catalyzed $265 million of investment in about 350 firms that have "created profits alongside practical environmental solutions" during that last 10 years (although the nonprofit does not take a stake in its companies). It also claims to have cut 135,000 tons of CO2 and placed 1,490,448 hectares of land under sustainable management. New Ventures is now looking to expand from its work in six of the world’s major developing economies: Brazil, China, Colombia, India, Indonesia and Mexico.

"We want to put our money where we get most bang for your buck in terms of environmental impact and drive clean economic growth of future," says Kirsty Jenkinson, the director of WRI’s Markets and Enterprise program that includes New Ventures. Her team finds the right companies and then scales their impact and profits, sometimes making them attractive enough for venture capitalist interested in returns, not impact, to invest. Training, not just money, has proven to be the key ingredient to growing the businesses.

New Ventures’ investments range from the A7 Brazilian electronic waste recovery firm to India’s Zameen Organic which links farmers to buyers in rich markets.

Some, such as Proteak, have successfully managed the transition from regional business to global enterprise on the verge of an IPO. Proteak’s sustainable teak plantations are an example of a responsible product—precious tropical hardwoods certified by the Forestry Stewardship Council—that shows sustainable can be synonymous with profitable.

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