Encourage Capital’s Fund For Indian Rooftop Segment Closes at $40 Mn

Encourage Capital has announced the first closing of a new fund at $40 million, which will invest in Indian commercial rooftop solar segment

Encourage Capital, LLC, an impact investment asset manager and advisory firm, has announced the first closing of a new private equity fund, Encourage Solar Finance, L.P. at $40 million. The fund will invest in Indian specialised financial institutions that can develop and scale commercial rooftop solar finance solutions for micro, small and medium-sized enterprises (MSMEs).

Prominent mission-aligned investors have participated in the first closing, including KfW, Capricorn Investment Group, the John D. and Catherine T. MacArthur Foundation, the Jeremy and Hannelore Grantham Environment Trust and the Sant Foundation. 

Recognising the vast potential of its solar resources and the increasing energy needs of a rapidly growing economy, the Indian government has set a target to deploy 100 GW of solar by 2022 (including 40 GW of rooftop solar). However, as of March 2019, only 3.5 GW of rooftop solar has been installed, with the MSME market largely unaddressed. According to an independent study commissioned by the firm, the rooftop solar market for MSMEs in India has a 15 GW potential, resulting in a $9 billion lending opportunity for financial institutions.

“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 Adam Wolfensohn, Managing Partner and Chairman at Encourage Capital. “Our fund aims to address these barriers by partnering with specialised 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.”

By providing much needed financial solutions to address important investments in clean energy, the fund believes that there is a unique opportunity to achieve compelling economic returns, given the rapid growth and superior asset quality of MSME lenders as compared with larger lenders, and to simultaneously reduce the carbon footprint of India’s industrialisation. 

“KfW has a long history of promoting sustainable development in India, particularly in financial inclusion and renewable energy,” said Dr. Adam Drosdzol of KfW. “Encourage Capital’s unique approach combines these two themes to make clean energy solutions accessible for MSMEs in India, thereby furthering sustainable development in the country.