Northern Arc Secures $65 Million Debt Commitment from Global Development Banks for Maiden Climate Fund

• The $65 million debt commitment from Global development banks aligns with Northern Arc’s vision to propel sustainable development initiatives.
• Fund aims to finance growth-stage companies in solar energy, e-mobility, sustainable agriculture and circular economy addressing critical funding gaps.

New Delhi :  Northern Arc, one of the leading diversified non-banking financial services companies in India is pleased to announce its maiden Climate Fund through its fund management arm, Northern Arc Investments IFSC Trust. The climate fund has secured $65 million in debt commitments that includes $50 million from the United States International Development Finance Corporation (DFC) and $15 million from OeEB, the official Development Bank of the Republic of Austria.

Powered by proprietary data-led proprietary technology solutions, deep sectoral expertise, robust risk management, and a financial ecosystem comprising of originator partners, lending partners, Northern Arc operates a diversified Lending, Placements and Fund Management business which has facilitated financing of over INR ~1.9 trillion aiming to empower 111+ million lives in India. Northern Arc manages an overall AUM of INR 151,210 million through its balance sheet and active AIF funds as of Sept 30, 2024. Northern Arc has had 6 successful fund exits that have provided with net fund returns of 11.72%-15.77% post expense pre-tax, without any delays and defaults.

Located in Gujarat International Finance Tec-City (GIFT City), the climate fund will extend debt financing to growth-stage companies operating in sectors such as commercial, industrial, and residential solar energy, energy efficiency, green buildings and materials, e-mobility, and sustainable agriculture. Additionally, it will focus on businesses innovating in the circular economy, water segment and adaptation technologies that seek to reduce environmental impact and promote long-term resilience.

The fund aligns with India’s broader climate goals, particularly its push towards renewable energy and sustainable practices, reinforcing Northern Arc’s commitment to helping the country meet its emissions reduction targets. By focusing on key sectors addressing climate mitigation and adaptation, Northern Arc is positioned to contribute to global climate action while supporting India’s transition to a greener economy.

“DFC is proud to support Northern Arc in advancing sustainable development initiatives in India. This transaction aligns with DFC’s goal of expanding financing for small and medium sized businesses that are promoting climate mitigation action and resilience through innovative technology including in the energy, agriculture, and e-mobility sectors,” said Justin Andrews, DFC’s Acting Vice President of Small Business & Financial Services.

OeEB, the Development Bank of Austria, has implemented more than 500 projects since its foundation in 2008 and places a particularly strong focus on climate financing in its strategy cycle 2024 – 2028. “Supporting India’s sustainable transition is essential for the global fight against climate change, and the expansion of renewable energy is of central importance for the country’s continued economic development. Therefore, OeEB is planning to contribute $ 15 million to the climate fund, and we are looking forward to working together with Northern Arc”, says OeEB’s Member of the Executive Board Sabine Gaber.

Highlighting the strategic importance of this initiative, Ashish Mehrotra, Managing Director & CEO, Northern Arc said, “The significant investment from DFC and OeEB reinforces our ongoing commitment to revolutionize climate finance as well as transform the financial landscape for all households and businesses in India. By channelling these funds into green projects across our focus sectors of MSME, Affordable Housing, Vehicle Finance, Agriculture Finance, Microfinance and Consumer Finance, we aim to create a cascading effect that promotes sustainable development. Our deep sectoral expertise allows us to effectively manage a diverse portfolio, while our strong risk management philosophy ensures the protection of investor interests, all with a focus on advancing climate finance solutions.”

On the significance of global partnerships for its maiden climate fund, Bhavdeep Bhatt, CEO, Northern Arc Investment Managers, said, “For net zero to become a reality, there is a need to fund climate-focused SMEs to promote sustainable practices at the grassroots level. However, the SMEs often struggle to access sufficient growth funding, highlighting the need for tailored underwriting approaches that consider their unique value propositions and financing needs. As climate change intensifies, the urgency to channel more capital toward these climate-driven enterprises becomes even more critical. Our maiden Climate Fund is uniquely positioned to bridge this gap. Leveraging our fund management platform and expertise in climate finance, we are committed to enhancing access to growth capital for these SMEs. We extend our gratitude to DFC and OeEB for sharing our mission and supporting us in enhancing access to finance for these businesses.”

The launch of Northern Arc’s climate fund with the backing of DFC and OeEB signifies a crucial step in supporting businesses that are pioneering innovative solutions to global climate challenges. This effort underscores Northern Arc’s broader strategy to drive meaningful climate impact and contribute to a sustainable future where businesses and communities thrive in harmony with the environment.