Topic: enterprise

New Ventures: Voices of the Entrepreneurs

Sarah Parsons — Mon, 12 Nov 2012 18:20:42 -0500

Summary: Voices of the Entrepreneurs

Small and medium-sized enterprises (SMEs) can account for as many as four out of five jobs and more than 29 percent of GDP in developing countries. Environmental SMEs—enterprises that capitalize on commercial opportunities while generating clear, measurable environmental benefits—have an important role in shaping growth that is both economically and environmentally sustainable.

Yet the entrepreneurs behind these environmental SMEs face many challenges that limit their ability to grow their businesses. The main roadblocks highlighted by the environmental entrepreneurs whom we interviewed were: accessing finance, attracting and maintaining quality human capital, tackling limited markets and mind-sets, overcoming unsupportive policies, coping with risk and uncertainty, and distributing their products and services. New Ventures addresses these roadblocks by empowering entrepreneurs to develop solid business plans and skills, linking entrepreneurs to networks of mentors and supporters, and showcasing entrepreneurs to investors.

There is much more to be done. The barriers that prevent environmental entrepreneurs from scaling up their businesses are far from gone, but as Earth’s resources become increasingly constrained, our future well-being will depend more than ever on the success of these entrepreneurs. In addition to accelerators like New Ventures, donors, investors, policymakers, corporations, and international development institutions will need to step up to enable greater success for environmental entrepreneurs.

A Note on New Ventures’ Transition

With strong, distinct New Ventures programs in Brazil, China, Colombia, India, Indonesia, and Mexico, WRI has decided to conclude its role as global coordinator. WRI is immensely proud of New Ventures’ accomplishments and is confident that the program will reach new heights with greater local and regional independence.

RELEASE: Transition of New Ventures Global Network

James Anderson — Wed, 26 Sep 2012 11:46:24 -0400

After 13 years of building support for environmental entrepreneurship, the World Resources Institute will conclude its role as coordinator for the New Ventures global network at the end of 2012. WRI recognizes that the New Ventures Local Centers have built strong, distinct programs in their respective countries, and we are confident that greater local and regional independence will allow New Ventures to move into its next phase of development.

Following is a statement by Manish Bapna, Managing Director, WRI:

WRI is extraordinarily proud of New Ventures’ accomplishments and impact in enabling the growth of environmentally focused entrepreneurs in emerging markets. Founded by WRI in 1999, New Ventures has provided business development support to 362 innovative small and medium enterprises (SMEs) whose goods and services produce clear, measurable environmental benefits, such as clean energy, efficient water use, and sustainable agriculture. Oftentimes these goods and services address the challenges experienced by the world’s poor. New Ventures has also facilitated $290 million of investment into these SMEs, helping them scale their businesses and yield positive impacts.

WRI has been privileged to partner with expert local organizations in establishing New Ventures Local Centers in six of the world’s most dynamic emerging economies:

SMEs in emerging markets play a critical role in the economy by creating jobs and spurring growth. As the need for sustainable economic development intensifies, New Ventures enterprises continue to prove that innovative technologies and business models can deliver environmental, social, and financial returns.

Much has been accomplished in the world of entrepreneurship over the past decade, including the formation of new investment vehicles emphasizing environmental and social returns (alongside financial returns), the creation of associations and alliances that bring together key actors, and development banks’ and agencies’ capital and technical assistance commitments to pursue development solutions through private enterprise.

However, there is still much more to be done. As the world tackles environmental challenges such as water scarcity, climate change, deforestation, and pollution—against the backdrop of continuing population growth—entrepreneurs will continue to be sources of innovation and action. Organizations supporting these entrepreneurs on the ground, like the New Ventures Local Centers, will continue to play a vital role in nurturing their efforts, affording them the resources necessary to scale their impact.

New Ventures – and the entrepreneurs and investors it works with – have proven that profitable enterprises can be created and scaled while simultaneously protecting natural resources and improving livelihoods. It is a model that will endure and create pathways for many others with ambition and dedication to sustainable economic development. WRI looks forward to many more extraordinary accomplishments for New Ventures in the coming years.

Q&A: Kirsty Jenkinson on New Ventures and Environmental Entrepreneurship

Kirsty Jenkinson — Mon, 15 Nov 2010 11:47:04 -0500

Kirsty Jenkinson talks about how New Ventures, WRI’s center for environmental entrepreneurship, helps environmentally-focused small and medium-sized enterprises (SMEs) in emerging markets compete in a global economy.

What is New Ventures?

New Ventures is a program that helps entrepreneurs in some of the world’s most dynamic, emerging economies– Brazil, China, Colombia, India, Indonesia and Mexico. We have facilitated more than $203 million in investment, and worked with 250 innovative businesses whose goods and services produce clear, measurable environmental benefits, such as clean energy, efficient water use, and sustainable agriculture. Often they also address the challenges experienced by the world’s poor.

For example, one of the companies we work with in China, called Ecostar, refurbishes copy machines from the United States and re-sells or leases them for 20 percent less than a branded photocopier. This company keeps used copiers out of landfills, supplies a valuable and affordable resource for companies across China, and generates jobs and profits. New Ventures helped Ecostar connect with investors and scale up its business to capture 60 percent of the photocopying market in China.

How do you select New Ventures companies?

Each year, New Ventures Local Centers in Brazil, China, Colombia, India, Indonesia and Mexico select five to 10 enterprises to receive six to eight weeks of intensive business development support and mentoring. Selection is based on criteria such as financial viability and profitability; the environmental and social benefits that the companies offer; the quality of the management team; the market opportunity that their products or services address; innovation and intellectual property in the business; and growth strategy – the scalability and impact that they are capable of achieving.

Ecostar, which refurbishes old copy machines, is just one example of a New Ventures company. Photo courtesy of Ecostar.

Once they are selected, how do you help New Ventures enterprises grow their business and access investors?

New Ventures’ country-based Local Centers play a critical role in building local support networks for selected enterprises. Along with providing business development training and mentoring, we connect companies to a local community of investors including, for example, angel investors, venture capital funds, and commercial banks. We look for opportunities to showcase the companies to investors, including at an annual Investor Forum in each country where New Ventures enterprises pitch their businesses to potential investors. It’s like speed dating, only it’s speed investing!

Why do environmentally-focused SMEs face challenges in attracting capital?

Historically, SMEs have often been dubbed as suffering from “the missing middle” syndrome. SME owners tend to ask their families or friends for start-up capital, but they can’t raise enough money to give them the scale of financing that they need. And while SMEs are often too large for microfinance institutions, they are too small for most commercial banks, who will not lend to them because they do not have the systems in place to provide transparent information to investors and lenders, or because the collateral requirements would be too onerous. Private equity finance – the alternative to bank loans – is rarely available for amounts under $2 million and therefore is an option only for the largest SMEs in developing countries. So SMEs in emerging markets end up falling between the private equity financing that is available for larger businesses and the microfinance or self-financing that works for individuals or smaller businesses. “Green” SMEs face additional barriers to growth because the sectors that they operate in are relatively new and not that well-understood by investors.

How does New Ventures bridge the “missing middle”?

The role New Ventures plays in breaking down these barriers is threefold. First, we serve as an objective intermediary who brings innovative companies to investors, on a local as well as global level. In April, we are hosting our first “Global Investor Forum” in New York. Unlike our annual Investor Forums that take place in the six countries, our Global Forum will showcase New Ventures companies in the United States to international investors. That is going to be hugely exciting. Along with these events, we work with New Ventures companies on an ongoing basis to get them better at presenting their businesses to investors. We help them collect and standardize the way they report key indicators of their financial, social and environmental performance. Practical tools and training, which help companies easily communicate with the investment community, are critical, we think, to scaling up environmental entrepreneurship. Ultimately, investors base their decisions on information and so we need to make sure they have the right kind at their disposal.

Our second role focuses on the areas where WRI traditionally works - identifying where current policies or frameworks are causing impediments to sustainable growth and investment in environmental sectors. We recently published a report, for example, on how to grow clean energy markets among India’s rural poor. Our aim with this kind of research is to fill in some of the information gaps about environmentally-focused SMEs and the sectors they operate in.

Lastly, we look for ways to work with partners to pilot and encourage new investment and new financing mechanisms to help bridge this capital gap.

What role can New Ventures play to encourage new financing techniques?

Systemic financial challenges require innovative financing solutions and so we are beginning to explore new relationships with different financial providers. Over the long-term, environmental entrepreneurship in emerging markets is likely to need a blend of capital sources including foundations and other sources of “patient” capital; development banks and institutions that traditionally work with companies in-country; and commercial investors. Over time, we will be looking for creative ways for these parties to participate in deals where each may have different return expectations, but all are motivated to invest in companies that will spur sustainable economic development. In these ways, New Ventures can play a critical convening role in the development of this kind of “blended” finance model, which is already being used for some sectors, but not to scale the growth of environmental SMEs.

Our vision is to address the barriers facing environmental entrepreneurs by increasing their access to finance and supporting their businesses so that they fuel the “green supply chains” of the future.

What are your goals for a “new” New Ventures? What do you hope to accomplish?

Over the past ten years, New Ventures has successfully supported an amazing range of environmental entrepreneurs but we’re always looking to the future. One of the questions we get asked a lot is, “Are we looking to expand to different countries?” A quick answer to that is at the moment we think we’ve got a very robust presence in six absolutely critical emerging markets, so our priorities remain focused on getting our model right and most importantly scaling it, in those countries. But, we need to be nimble and respond to opportunities to expand environmental entrepreneurship around the world. SMEs are key to economic growth and if the world is going to successfully transition to a low-carbon economy, SMEs that provide environmental solutions are going to be absolutely essential. Our vision for New Ventures is to address the barriers facing environmental entrepreneurs by increasing their access to finance, and supporting their businesses so that they fuel the “green supply chains” of the future— providing products and services that are required across the globe.

Learn more about New Ventures at www.new-ventures.org

Expanding the Market for Clean Energy in Rural India

Saurabh Lall — Wed, 01 Sep 2010 09:47:16 -0400

SBA Hydro is just one of the many companies starting to bring clean energy to India’s rural poor.

This post is the first of a series by WRI and CDF-IFMR on the market for clean energy for the base of the pyramid in India.

Just over a year ago, I was sipping tea at a roadside stall near the village of Thatulkod, in Himachal Pradesh, India. This small farming community lay far from the tourist trail in the Kullu valley, almost a hundred kilometers from the nearest town. I listened to Subhash Chand, a local apple farmer talk about the quality of electricity in his village:

Most houses have electrical connections, but what is the use? We have power for a few hours a day. Even when there is electricity, it is barely enough to operate one or two light bulbs. We cannot rely on it.

Over more cups of tea, other villagers told their stories – a college student trying to study under the dim light of a kerosene lantern, a small hotel that relied on an expensive diesel generator because of the frequent power outages, and farmers who had no alternative but to use conventional fuels like kerosene, diesel and firewood for their energy needs. In addition to exposing these households to dangerous toxins and pollutants such as carbon monoxide, these fuel sources also contributed to pollution and environmental degradation. Not only did they suffer from the poor quality of electricity, but the residents of Thatulkod were also beginning to raise concerns about changes in the climate – many farmers complained about the warmer winters negatively affecting their apple harvests in recent years.

Villagers from Thatulkod. Photo credit: Saurabh Lall

These stories repeat across thousands of Indian villages with little or no access to electricity. According to analysis from our forthcoming report, India’s energy shortage is most acutely felt by its rural poor – the 114 million households that spend less than US$75 on goods and services per month (known as ‘Base of the Pyramid.’) About 40 percent of India’s rural households do not have access to electricity, and more than 85 percent must depend on “dirty” kerosene for lighting and firewood for cooking.

The people of Thatulkod are more fortunate than many of these households – over the next year, a company called SBA Hydro will construct a small hydro-electric power plant nearby, which will supply sustainably generated electricity to Thatulkod and several neighboring villages. These power plants are constructed along the run of the river and range in size from 100 kW to 1000 kW –sufficient to generate electricity for local needs with minimal impact on the environment. SBA Hydro currently operates two similar power plants near the towns of Sainj and Raskat in Himachal Pradesh which supply electricity to over 2500 rural households.

SBA Hydro founder S.K. Sharma (right) reviews plans for a new 100KW micro hydro plant. Photo credit: Saurabh Lall

As India struggles to provide cleaner and more reliable sources of energy to its rural poor, a growing number of innovative small companies, like SBA Hydro, are selling clean energy products and services directly to India’s rural ‘Base of the Pyramid’ (BoP) population. These new technologies include solar-based home electricity systems and lanterns, energy efficient cookstoves and decentralized electricity services generated from micro hydro and biomass gasifiers. However, most of these companies remain small and face considerable challenges penetrating the market because of poor rural distribution and retail networks.

In late 2008, India’s Centre for Development Finance at the Institute for Financial Management and Research (CDF-IFMR) and my team at the World Resources Institute’s New Ventures Program recognized the immense potential of this market and began analyzing the investment outlook for the clean energy industry serving India’s rural poor. To ensure we captured successful practices from other parts of the world, we also looked at clean energy companies serving rural markets in other countries that could provide valuable lessons to their Indian counterparts.

SBA Hydro’s other power plant in nearby Sainj provides 1MW of renewable energy. Photo credit: Saurabh Lall

Together with colleagues from CDF-IFMR, we conducted field research with 15 clean energy companies (11 Indian and 4 global), across seventeen cities and twenty-six small towns and villages in India and four other countries: Bangladesh, Brazil, Cambodia, and Kenya. We interviewed company staff, including executives, middle managers, and field staff, as well as their distribution, retail and financial partners and also organized forty focus groups made up of more than 240 rural BoP users, and nonusers, of clean energy products and services.

The result is our forthcoming report Power to the People: Investing in Clean Energy for the Base of the Pyramid in India. The report analyzes the challenges as well as the market opportunities to help investors – both in India and abroad – better understand the enormous potential of this market. Despite the barriers companies face, the report details significant opportunities for growth in the BoP market.

The next few posts will dive deeper into our methodology, the sectors we profiled as well as consumer insights gained from our focus group discussions with BoP users. We believe that increased, patient capital can greatly expand the reach of companies like SBA Hydro, and provide clean energy solutions for the villagers in Thatulkod, and beyond, in a profitable and sustainable manner.

Santosh Singh is a Senior Researcher and Sreyamsa Bairiganjan is a Researcher in CDF-IFMR’s Rural Market Insight Group.

Small Companies, Big Impacts

Maggie Barron — Mon, 19 Oct 2009 11:37:18 -0400

The New Ventures directors answer questions about what small, sustainable companies can do to boost local economies and protect the environment.

One company supplies solar lanterns to communities without electricity. Another refurbishes discarded copy machines and resells them to companies that couldn’t otherwise afford them. Another turns coffee waste into ethanol. Small and medium enterprises (SMEs) are the engines of local economies. They drive innovation, spur equitable growth, create jobs, and supply poor communities with better products and services. But many small entrepreneurs have trouble bringing their ideas to fruition, and most will fail within the first few years. For sustainable SMEs – those that manufacture and market environmentally friendly products and serve low income communities – the challenges can be particularly daunting.

WRI created New Ventures to help sustainable SMEs build their capacity, learn key management skills, and connect with investors. Working in six of the worlds’ emerging economies – Brazil, China, Colombia, India, Indonesia, and Mexico – New Ventures helps these countries develop their economies while protecting their environment.

I recently sat down with the six New Ventures country directors at their annual meeting in Washington, DC and asked them to explain why these small companies can have such a big impact:

What challenges do small and medium enterprises (SMEs) face?

Sanjoy Sanyal, India: In the developing world, SMEs lack one very critical resource: credit and financial resources to grow. They may also have access challenges, such as access to markets, access to the right kind of talent, but fundamentally the lack of access to credit and financial resources can be a debilitating obstacle.

Diyanto Imam, Indonesia: There’s also the challenge of capacity building. In terms of technical knowledge, these people know what they are doing. They know how to develop efficient machines, they know how to create a formula for an organic pesticide or herbicide. But many of them don’t know how to run a company, they don’t know how to develop a balance sheet, or they don’t even know what a balance sheet is.

Diyanto Imam

They don’t have the business skills to begin with, and for green SMEs in particular, they also need to educate their customers about their products. Most people in Indonesia don’t really differentiate between green products and conventional products. They equate green products with a premium price and don’t understand the other benefits.

Andre Carvalho, Brazil: In Brazil, it’s very difficult to attract investment. Many companies don’t know how to market themselves. They don’t know what “green” means exactly, or they’re green and they don’t even know it. These companies need investment, they need resources, they need networking opportunities, and they need media attention.

Why is it so important to help SMEs?

Sanjoy Sanyal, India: In developed countries like the US or in Europe, SMEs contribute a substantial percentage of the gross domestic product. So vibrant SMEs, when they’re well managed, have the ability to radically reshape a country’s economics. At the same time they have these challenges. So it’s really fertile ground for intervention.

Diana Gaviria, Colombia: It’s not only important to help SMEs, it’s important to help green SMEs. In many ways, in our country, SMEs are the motor of the economy, and by having green SMEs that are successful, we’re promoting more sustainable societies and showing the world in general that having a sustainable business model is something not only viable but that can also promote economic development.

Can helping SMEs also help the poor?

Andre Carvalho, Brazil: Yes, definitely. SMEs can work more directly with smaller suppliers than big companies can. The majority of suppliers to big companies have to be big themselves in order to keep up. If we help SMEs develop, they can act as suppliers to big companies and also develop relationships with smaller and local suppliers and bring more business to them. The business model is more inclusive.

Andre Carvalho

Diyanto Imam, Indonesia: They provide employment, which is particularly good for Indonesia because for the last thirty years, the center of economic activity has been in the capital in Jakarta. 70% of the money circulates in Jakarta, and that’s not good for the economy. So SMEs can really help develop the economies of smaller cities.

Sanjoy Sanyal, India: Most of our SMEs have base-of-the-pyramid strategies, where they either provide services to poor communities or low-cost products. They do help the poor, not necessarily because they are small, but because of the nature of the business they do.

Sanjoy Sanyal

The type of companies we work with are the ones that sell solar lanterns, or energy efficient cooking stoves for poorer people, poorer women in particular. These products help bolster local economies in both a socially and environmentally constructive way.

What does New Ventures do to help?

Weijia Ye, China: We help sustainable SMEs grow by getting them the right type of funding. We work with them to develop their business plans and help them network with a range of mentors whom they could not access by themselves.

Rodrigo Villar, Mexico: We are also trying to convince people that being an entrepreneur is better than just having a regular job. We don’t really have any entrepreneurs in Mexico. There is a negative connotation to what “businessman” means there; usually it makes people think of rich men who have stolen money. So no one wants to be an entrepreneur. Everyone wants to get a university degree and then work for a big company. And when you talk about environmental entrepreneurs, it’s even harder. We have to convince people to go into environmental areas and industries, because they can make a profit and help their society develop.

Diana Gaviria

Diana Gaviria, Colombia: One of the most important things we do is act as an honest broker and help these companies get to investors and institutions that can aid them in their process of acceleration. We’re trying to promote a climate where individuals of high net worth can invest in companies rather than just big institutions that come in and do all these very demanding due diligences and long processes for riskier business.

What are some examples of the companies in the New Ventures portfolio?

Sanjoy Sanyal, India: One company that comes to mind is called Sumaya HMX Systems. They make energy efficient air conditioning systems. India and large parts of the developing world are hot and tropical, and air conditioning is by now a mandatory requirement for most workplaces, but at the same time they consume loads of energy, and are a big source of carbon emissions. This company uses a technology that allows adaptive cooling – a more efficient cooling system – which brings the temperature to only a couple of degrees above what you’d expect in a conventional air conditioning system. It’s still comfortable, but it obviates a lot of the energy usage and carbon emissions in more conventional AC systems. It’s a great technology; it’s very useful and appropriate for large parts of both the developing world and the developed world. I think New Ventures’ intervention in this company was at a very interesting point. We were able to get the company a corporate investor, which took on a simple majority stake in this company, and helped the innovation reach a very large audience because of their marketing and technical service operation.

Diana Gaviria, Colombia: In Colombia we work with a man who had his own water treatment company that mainly served affluent neighborhoods. He wanted more out of his business, and so he investigated technologies and came up with one that would provide water to communities that currently don’t have any access to water at a very low cost, much less than what people were already having to pay. When he first came to us we weren’t sure if his proposal was viable. He wanted the communities to manage the whole operation, so he not only wanted to sell to them but he wanted them to be involved in the management of the business. We had many discussions with him and finally we were convinced. And so with the help of students from the Cornell MBA program and business mentors, we put together a viable business model, where he is able to produce portable water treatment plants that can be run and operated in local communities.

Rodrigo Villar

Rodrigo Villar, Mexico: We work with a company called Biofabrica Siglo XXI. They came to us four years ago. The owner of this company was an agronomist, he didn’t have any experience with business, and he was using this technology to change chemical fertilizer into biological fertilizers. So we helped him with the business plan, and now, four years later, this company is worth $7 million, and over 200,000 hectares are using his bio-fertilizers instead of the chemical ones, and he was able to drop the price of his product too, so he continues to get new clients.

How is the economic crisis impacting your country?

Weijia Ye, China: It’s different for different industries. In general it’s hard to say “Now it’s ending.” I would be pretty cautious and wait another half year or year. This crisis is so different from previous ones because no one can predict it. Some of them are doing pretty well, but it doesn’t mean it’s the end of the crisis. I think the current financial crisis is sending a very strong, clear signal that there is something fundamentally wrong with this current regime of the market economy.

Rodrigo Villar, Mexico: Between the economy, the H1N1 flu scare, and the drug problems, it’s been a tough year for us. But a recession can be a good time for entrepreneurs. Companies are growing. If they can make it work now, they’ll grow even more as the economy recovers.

Can green companies be competitive in the current economy?

Sanjoy Sanyal, India: These are early days. But I think there clearly is an understanding that yes, green companies can be competitive. A lot of it is coming from the fact that, while the US is still struggling with its economy, it is still clearly signaling to the world that businesses need to develop a more sustainable model. So whether it’s Walmart or a Cisco, people are saying that we need to incorporate energy efficiency and climate into our business thinking. Another thing the US is signaling to the world, which I think emerging economies are picking up on, is the fact that consumers are willing to vote with their wallets that they would like to spend more on goods and services that have a clearly professed environmentally positive, or at least an environmentally neutral effect.

Andre Carvalho, Brazil: Six years ago the community of investors in Brazil thought that sustainable business was only something very small, and that it couldn’t be scaled up. But New Ventures has been showing them that there are a lot of opportunities, and showcasing successful fair trade models that are part of a new history that’s being written right now. We are showing the mainstream that there are other ways to think about community development.

Weijia Ye

Weijia Ye, China: We want our SMEs not only to be producing green products, but also to have strong values. I believe that the future of the world depends on all companies becoming sustainable. There’s a call for a new generation of enterprises, which should be different from Henry Ford’s generation. Because at the time, if you look at the management of these original industries, they were quite brutal. We’re at the stage where we should not be doing the same things as we did before. We are ready to develop new models.

What motivates you in your work at New Ventures?

Diyanto Imam, Indonesia: You get to meet these great individuals with ideas, with fire in the belly. They have amazing passion. I like to meet with these entrepreneurs simply because they are passionate about what they do. They have this belief that they can change the environment and affect the people around them in a good way. The spirit is there. In Indonesia, life is tough. But these people see opportunities.

Weijia Ye, China: My wish is for the next generations of big companies to be fundamentally different from current versions. They should not be developing Corporate Social Responsibility plans only when they become big. They should have these plans in their DNA from the very beginning. It should be incorporated into their way of doing business. These small companies we work with have the right core values now, and when they grow they will be part of the next generation of business.

On the Frontiers of Finance: Scaling up Investment in Sustainable Small and Medium Enterprises in Developing Countries

Tim Herzog — Fri, 28 Aug 2009 14:24:09 -0400

Report Contents

Why invest in sustainable SMEs?
Financing sustainable SMEs in developing countries: An overview
Investor challenges
Bridging the finance gap: Recommendations

What Are Sustainable SMEs?

This report defines sustainable SMEs as those whose core business produces a triple bottom-line return—that is, social, environmental, and financial gains—and therefore contribute to dynamic, healthy economies and societies. Such enterprises tend to be of two types: those that use natural resources responsibly, such as organic agriculture, sustainable forestry, and ecotourism; and those that offer substitutions or solutions for otherwise resource-intensive products or services, such as clean technology, renewable energy, and new materials. In this report, SMEs refer to enterprises that are legally formed and operate within the formal economy. As defined by the International Finance Corporation (IFC), a small enterprise employs between five and 49 people, and a medium enterprise employs between 50 and 250 people.

Sustainable SMEs: The Future for Emerging Economies

Small and medium enterprises (SMEs) play a critical and well documented role in both developing and industrialized economies. They drive innovation, spur economic growth, create jobs, and facilitate the provision of goods and services.

Sustainable SMEs are those that manufacture and market environmentally friendly products and/or serve low-income communities and generate additional benefits for society and the environment. Financing such value-added businesses in emerging economies makes sense for both business growth and sustainable development. In developing countries, however, sustainable SMEs face major barriers to growth and success, most notably access to finance and business development support.

Over the past decade, specialized financial intermediaries—generally, those that are international, often with a non-profit organizational structure—have emerged to provide finance and business development support to sustainable SMEs in the developing world. This investment community has grown significantly in recent years, along with the rising interest in green investment, clean technology industries, and market-based approaches to poverty reduction and sustainable development.

On the Frontiers of Finance provides an overview of the current landscape, lending practices, and principal challenges of financial intermediaries providing capital to sustainable SMEs in developing countries. The objective is to help stimulate greater and more effective sustainable SME investment by better understanding how the sector can best be supported and expanded.

Investment Leaders Survey

In 2007, WRI and Boston College, with support from the International Finance Corporation (IFC), gathered together and interviewed 20 leading sustainable SME investment fund managers from Africa, Asia, Eastern Europe, and Latin America. Our discussions focused on challenges, opportunities, best practices, and pathways to sectoral growth, which forms the basis of this report. Section 3 and the appendix are overviews of these funds and their investment models.

In reporting our findings, we have divided the interviewees into two broad categories:

Blended Capital Intermediaries—investors with a primary focus on creating positive economic, social, and environmental impact by supporting sustainable SMEs and generating financial returns for investors. These are mostly non-profit entities with an international focus, and tend to be based in the U.S. or Europe;
Venture Capital Funds (VC Funds)—investment vehicles that are for-profit, commercial entities that provide market returns. This report examines VC funds in developing countries, those that are tapping into opportunities in green or socially oriented markets, such as cleantech funds.

Our survey revealed the intermediaries face three major challenges: raising funds for what remains an outlying frontier of the finance and development mainstream; justifying to the intermediaries’ investors the high costs of technical assistance for businesses; and finding ways to capture the “added value” of positive social and environmental impacts both cost effectively and consistently across the sector.

Recommendations

Improve Capital Allocation: Educating commercial investors and grant funders about the business models and performance of SME financial intermediaries, combined with high standards of accounting transparency among the intermediaries would greatly improve the efficiency of the fundraising process. Compiling information about the financial viability and success of different intermediaries and highlighting the growing track record of commercially viable investments is crucial in order to attract further capital to the sector.
Promote Financial Innovation: Long-term approaches and innovative thinking focused on system-wide barriers are needed to move the sector toward the status of both a recognized investment class and a strategic priority area within the development community. Sector-wide initiatives, angel investor networks and experimentation with social stock exchanges are efforts in the right direction that need to be supported and where successful, replicated and scaled.
Capture the Triple Bottom Line: As more investors and donors enter the impact investing space, they will focus even more on demonstrable results and measurable effects. Smart, comparable metrics would facilitate the investment decision-making process by providing a clear picture of which intermediaries’ activities are best aligned with the priorities of impact-driven donors and investors. For this reason, comparability is paramount when measuring and communicating impact. Dedicated resources and a collaborative effort among leading intermediaries, investors, donors, and other stakeholders is required to move toward a shared standard methodology for impact measurement and reporting. Over time, aggregate results will help validate and evaluate the efficacy of the enterprise development community’s market-based approach to socioeconomic and environmental issues.

Both development and investment trends are leading major advances in sustainable SME financing. The scale and speed of these advances are not, however, meeting either the demand of local entrepreneurs or the urgency of the social and environmental challenges facing the world. Opportunities to achieve development and environmental goals while delivering financial returns are being missed.

We hope this report will inspire investors, financial intermediaries, the philanthropy and donor community, and enterprise development organizations to increase capital flows and improve capital deployment to sustainable SMEs in developing countries.

Living Up to Potential: India's Energy Savings Companies

Ella Delio — Tue, 30 Jun 2009 12:11:50 -0400

The market potential for energy savings companies (ESCOs) in India is great, yet barriers still stand in the way of the industry’s growth.

Listen to the full podcast interview:

Download (MP3, 3.0 Mb)

In April 2009, WRI released “Powering Up: The Investment Potential of Energy Service Companies in India,” a study that examined the potential of India’s Energy Service Company (ESCO) industry. The authors found that with an investment of US$10 billion dollars in energy efficiency improvements, India’s economy would see benefits of up to 183.5 billion kilowatt hours in energy savings. The publication is part of ongoing research on Accelerating Clean Energy Markets in India.

In this interview, WRI Ella Delio gives some background on ESCOs in India, and describes how this industry can overcome its most significant barrier to growth–a lack of access to finance:

Full transcript:

Q: How big is the potential for energy savings through energy conservation efforts in India?

A: The potential for energy savings in India is tremendous. With an investment of $10 billion dollars, India can realize 183.5 billion kilowatt hours of savings annually. That is 36% of their annual electricity consumption. And a key element of realizing this potential is the Energy Services Company industry.

Q: What is an energy service company?

A: An Energy Service Company, or an ESCO, is a company that provides energy efficiency related services, and operates on an energy performance contract. Which means that their revenues are earned based on the amount of energy savings that they produce for the client. The majority of ESCO projects have payback periods of two years, and on average, the clients of ESCO’s save around 20-25 percent of their baseline energy costs.

Q: How big is the ESCO Industry in India?

A: In India, the ESCO industry has grown tremendously over the past five years. From 2002-2007, the compounded annual growth rate was 96%, and it is estimated that in 2008 the growth rate was 62%. This high growth rate is due to rising energy costs, to the desire of enterprises to increase their cost competitiveness, and due to the greater procurement of energy services from government agencies in India. Despite this high growth, though, in the past five years, India’s industry is still relatively small to other emerging economies such as Brazil and China. In India, in 2007, the annual revenues of the industry was $18 million US dollars, while in Brazil, for the same year, the industry revenue was $280 million US dollars – which is 15.5 times more than that of India’s.

Q: What are the barriers to growth of the ESCO industry?

A: One of the primary barriers to the growth of the ESCO industry is the lack of access to financing for the energy service companies. WRI’s analysis shows that there are attractive investment opportunities to fund ESCO’s, especially among debt investors such as commercial banks in India, and one of WRI’s recommendations is for these banks to pilot financial products targeted at ESCO’s and their energy efficiency projects. In fact, WRI is currently in talks with several national Indian banks to explore this option. And we hope that by the end of June 2009 we will have an agreement with at least one of these banks to pilot such a financial product.

There are other barriers to the growth of the ESCO industry, such as the lack of a strong national industry association for ESCOs, as well as the lack of confidence of the prospective clients in the ESCOs. And we provided recommendations to address these barriers in our new report called “Powering Up,” and we hope that all those who have listened to this video today, and are interested in learning more about the investment potential of the ESCO industry in India will download the report from the WRI website.

Seizing India's Sustainable Investment Opportunities

Chandan Singh — Tue, 02 Jun 2009 08:22:10 -0400

The New Ventures India community recently convened its annual Investor Summit to discuss small and medium enterprises (SMEs) and the opportunities and obstacles investors face.

The Coaches Network, a group of private advisors from some of the leading institutions in India, met with the New Ventures companies individually to analyze how they may capture opportunities and overcome any barriers that are present in this economy. Meanwhile, the New Venture India’s Green Investor Network, a platform for investors to interact with sustainable enterprises, discussed the New Ventures India activities and pipeline development.

The Green Investor Network also participated in a presentation and discussion around findings from two of the World Resources Institute’s publications. The first publication–Powering Up: The Investment Potential of Energy Service Companies in India–focuses on the Indian energy service company (ESCO) industry, which can play a major role in realizing energy efficiency opportunities. The second presentation focused on a soon to be released WRI publication on the potential for concentrated solar power.

Secretary Dinesh Rai of the Ministry of Micro, Small and Medium Enterprises (MSME), released Powering Up to the Indian public for the first time at the Inaugural Session of the Investor Summit. The publication provides the first quantitative and qualitative look at the market potential of the Indian ESCO industry by analyzing the energy efficiency scenario in India, market data from over 90% of the identified Indian ESCOs and comparisons of the Indian industry to the ESCO industries in Brazil, China and the United States.

Following this presentation, WRI and CII-Green Business Center held a press conference for the publication’s launch. Many members of the press asked questions about India’s energy efficiency industry and the role of the energy service company (ESCO) industry in realizing their tremendous potential for growth.

At the press conference, Dr. Datta Roy, CEO of DSCL Energy Services, discussed how ESCOs could help the small and medium enterprises (SMEs). Dr. Roy pointed out that it can be difficult to approach SMEs on an individual basis because of an owner’s lack of time to focus on energy costs on top of all other aspects of the enterprise. For ESCOs to penetrate the SME sectors, he said, they need to do so at a SME cluster level, prove a technology, process, or product that will bring energy savings and provide this via an ESCO model.

A SME cluster is a geographical concentration of enterprises producing complimentary products. Typically, within a SME cluster are a number of enterprises with similar opportunities (energy saving measures) and barriers (cost competitiveness of goods). If an ESCO can implement a successful project in one or two SMEs within a cluster, reduced market development effort is needed for the rest of the cluster.

WRI is currently in discussions with a number of Indian banks to explore setting up a customized financing mechanism to fund these kinds of SME projects. Not only will WRI be aiding the banks with the introduction of a new financing mechanism, but also with their implementation of the mechanism to its customers within SME clusters. This financing mechanism is needed to overcome a few of the major barriers for these kinds of projects such as the exclusion of soft costs for financing.

In addition, the NVI community gathered for its annual Steering Committee meeting, providing a guiding direction to the program for the year to come. Included in this committee are India’s largest investors in small to medium enterprises (SMEs) and other stakeholders in India’s entrepreneurial and business sector.

The event concluded with a panel discussion on the impact of the financial crisis on sustainable investments in India. The panel brought together investors from ICICI Bank, Sequoia Capital, IEP Advisors Private Limited, the Acumen Fund, and New Ventures India enterprises such as Sumaya HMX and Conserve HRP. Participants remarked that the markets had been experiencing an increased volatility not seen in their lifetimes, citing bank interest rates and the Indian stock market as examples.

However, one panelist said their fund had been able to withstand the fluctuations through its focus on energy efficiency and natural resource companies–a fact that confirms the investment case for the kind of high-growth sustainable enterprises that New Ventures supports.

Makeover of Top Business Blog Looks Like a NextBillion Bucks

Paul Mackie — Thu, 26 Mar 2009 09:15:19 -0400

NextBillion.net - one of the Web’s top business blogs - today announced a new look intended to make it the go-to online resource for discussions about business-model development aimed at helping poor people.

“What we need is for iconic companies doing things at the bottom of the pyramid to be highly publicized,” said University of Michigan business professor C.K. Prahalad, a fan of the site and author of The Fortune at the Bottom of the Pyramid. “NextBillion.net can provide stories that allow people to understand that this is a real market opportunity, that the poor can be extraordinarily good micro-entrepreneurs, micro-producers, micro-consumers, and micro-innovators.”

NextBillion.net serves as a resource for corporations, foundations, students and professors at business schools, poverty-focused non-profits, development organizations, and many others. Topic areas include telecommunications and IT, successful business models, policy, financial services, consumer products, agriculture, health, education, energy, and strategy.

Originally launched in May 2005, NextBillion.net now has 10 staff writers and editors and more than 40,000 unique visitors per month. Those visitors include employees from Fortune 500 companies like Google, SC Johnson, Lenovo, DuPont and Microsoft, to name a few.

NextBillion.net has a dual meaning: on the one hand, the phrase represents the next billion people to rise into the middle class from the base of the economic pyramid (BoP); on the other, it indicates the next billions in profits for businesses that fill market gaps by integrating the BoP into formal economies. The site highlights business strategies that open opportunities and improve the lives of the world’s approximately 4 billion low-income producers and consumers. Successful business models - inherently versatile, innovative, and driven by the profit motive - can sometimes tackle development challenges more quickly and effectively than government and aid mechanisms.

The Web site’s new look includes:

A newsroom with streaming mainstream-media articles about BoP issues
An interactive research report and publications section
A full Spanish version, with a team of writers from Latin America
A career center with jobs, internships and volunteer opportunities in the BoP sector

  <img src="/sites/default/files/Next%20Billion%20logo.JPG" width="167" align="right" height="61" />

“This is the online hub for all business innovation for poor people at the base of the pyramid,” said Francisco Noguera, co-editor of NextBillion.net and a research analyst at the World Resources Institute (WRI), which developed the Web site in partnership with Acumen Fund.

“The research and vast amount of ideas compiled at NextBillion.net over the past four years is extremely user-friendly and allows people to find each other and really be part of this business community,” added Robert Katz, co-editor of NextBillion.net and an associate at Acumen Fund.

The Web site redesign was completed by Modo Design Group and funded in part with a grant from The John D. and Catherine T. MacArthur Foundation.

Energy Efficiency Opportunities in India

Saurabh Lall — Mon, 23 Mar 2009 10:18:49 -0400

Forthcoming WRI research hopes to help overcome barriers in India’s burgeoning ESCO market.

India’s energy demand is expected to more than double by 2030, and there is a pressing need to develop innovative ways to conserve energy. Energy efficiency measures such as the efficient lighting installation, motor control technologies and co-generation systems can reduce energy consumption and consequently, lower operating costs.

According to data from the Indian Ministry of Power, the investment potential for energy savings amounts to USD 9.8 billion with annual savings of 183.5 billion kWh. Those energy savings would mean 148.6 million tons of avoided CO2 emissions per year.

In recent years, domestic and international energy efficient technology providers and equipment manufacturers have recognized the market potential of energy efficiency products and services.

The growth of this industry has led to investor interest in funding the energy efficiency sector. In 2007, ICICI Bank, India’s second largest commercial bank, provided $1.25 million in debt funding to HMX Sumaya, a New Ventures India finalist company that manufactures energy efficient Heating, Ventilation and Air Conditioning (HVAC) systems. In 2008, Tribi Embedded Technologies, another New Ventures India finalist company, received $2.5 million in equity funding from Sequoia Capital, an international Venture Capital firm with close to 60 investments and $1.8 billion capital under management in India.

The Energy Service Company (ESCO) industry is a sub-sector within the energy efficiency industry that can play an important role in realizing energy savings and financial returns in India. An ESCO is a company that provides energy efficiency-related services on a performance contracting basis, unlike energy auditing or consulting firms who use a traditional fee for service model. ESCOs develop and implement projects that result in energy savings for their clients, and assume the risk that the project will save the guaranteed amount of energy. ESCOs measure, monitor and verify the energy savings and are paid on the basis of the actual savings realized.

The concept of performance based contracting is what sets ESCOs apart from consulting firms and equipment contractors, since the compensation for the ESCO is directly linked to the amount of energy actually saved by the client over a specified period of time. This mechanism gives ESCOs a strong incentive to maximize energy savings through the implemented measures. In the traditional contractor model, payment is only for the specific equipment and services provided, and contractors are not accountable for the actual amount of energy saved once the project is implemented.

Compared to similar industries in US, Brazil and China, the Indian ESCO industry is relatively small, but has grown quickly over the past five years. One of the factors holding back the Indian industry has been the ESCOs’ lack of access to financing.

As part of the Accelerating Clean Energy Markets in India (ACEM) project, WRI has analyzed the investment potential of the ESCO industry in India. The resulting report will be released in April, and in it, WRI seeks to address the lack of market information about this high growth industry.

The ACEM project is working with financial institutions to establish innovative funding mechanisms for clean energy market expansion in India. The project aims to leverage US$ 125 million or more in committed investment to clean energy by 2010, and bring investment to over 20 clean energy enterprises.

WRI started the research by consulting various stakeholders in the Indian investment community on promising clean energy sectors that would benefit from new financing mechanisms. Investors expressed interest in the ESCO concept, but cited the lack of market information and analysis as a barrier to investing in the industry.

To address the gaps in information, WRI conducted a survey of the Indian ESCO industry and interviewed various banks, government officials, ESCOs, and ESCO clients to develop a market profile of the sector. Using findings from this research, the ACEM team aims to work with Indian banks on ways to increase investment capital for ESCOs and their projects, and substantially increase the opportunity for energy efficiency gains.

The Green Investment Challenge in China

Ray Cheung — Mon, 22 Dec 2008 17:19:42 -0500

Despite the global economic downturn, China’s environmental and renewable energy sectors are poised for another year of strong growth. However, private investors must exercise caution, as green industries still face a daunting array of challenges.

So far, the Chinese green sector appears to be unscathed from the current financial crisis with no shortage of capital flowing in. The most recent boost of course was the central government’s RMB 4 trillion (US$585 billion) economic stimulus package, which includes RMB 350 billion (US$36.5 billion) for environmental projects, such as waste-water treatment and renewable energy facilities.

The benefits of this government-backed stimulus are already being felt as there has been a surge in government-solicited bids for environmental projects across the country. This of course has led to new investor optimism. The private consulting firm, the CleanTech Group, reported that investors at its recent December conference in Shanghai see no slowdown in the Chinese cleantech industry. Meanwhile, the super-ministry National Development Reform Commission recently reported that for the 4th quarter alone, investments in the country’s rural water resources and energy facilities, such as biogas, topped over RMB 22 billion (US$3.2 billion).

While all this is no doubt good news for Chinese green industries and the country’s quest to improve its environmental quality, investors seeking to make a quick profit from this growth must beware. The reason is simple: while significantly improving, the Chinese green sector remains an extremely competitive industry that is fraught with challenges in which only the strongest companies can thrive.

One key challenge is costs. While labor is no doubt cheaper in China than elsewhere, the Chinese business climate is still exposed to withering competitive pressure, and firms must constantly find ways to make lower-priced products. However, Chinese manufacturing expenditures have surged, particularly on raw materials, many of which must be imported. For example, the August 2008 Chinese purchaser prices for raw materials, fuel and power jumped by 15.3 percent compared to the same period in 2007. These pains are particularly being felt by the Chinese photovoltaic firms who pay as much as 100 percent more than their global competitors for imported supplies of silicon needed to produce the wafers. This added cost often negates the competitive advantage in labor costs.

Another challenge is the lack of human capital. While China has no shortage of smart people, the brightest minds are entering more lucrative industries, such as finance and information technology. These companies can quickly turn around profits, as opposed to the environmental companies whose revenue streams may take years to develop. The result is that many Chinese green companies face a deficit of human capital, unless they are willing to pay top notch salaries.

Perhaps the most important challenge is that the market for environmental goods and services remains fragmented because of the undeveloped regulatory infrastructure. No doubt, the country has been strengthening its environmental laws and increasing the powers of its environmental agencies. However, enforcement remains weak. For example, the Ministry of Environmental Protection (MEP) found in an investigation of the country’s 500 largest firms that more than 40 percent failed to adopt the necessary environmental abatement measures (story in english) they promised in their environmental impact reports. MEP also reported that only one-third of the country’s completed waste-water treatment projects are operating at capacity. As a result, China still faces severe pollution problems. According to MEP, the number of reported serious polluting incidents throughout China is increasing by 30 percent annually with one incident now being reported every 2 days.

For sure, China remains a fertile ground for greentech entrepreneurs to not only help improve the country’s environment, but earn substantial profits while doing so. But given the cut-throat competitive environment and other market challenges, the success of any particular firm is by no means guaranteed. Investors seeking to profit from China’s environmental cleanup drive should look for firms that have the right combination of human capital, business skills, and strategy.

This article is excerpted from the book Sustainable Investing: The Art of Long-term Performance published by Earthscan and edited by Cary Krosinsky and Nick Robins.

Mayors "Get It" on Climate Change

Jonathan Lash — Mon, 29 Sep 2008 15:31:17 -0400

Ironically, the most ambitious U.S. action in the fight against global warming is coming from big cities and their mayors.

It seems preposterous on its face. Each city’s emissions are only a tiny fraction of the global pie. Cities can’t force utilities to shift to renewables, or make Detroit produce smarter cars.

Nonetheless, some of the biggest U.S. mega-cities are stepping up in a big way on global warming:

In San Francisco: Mayor Gavin Newsome committed his city to reduce emissions 20% below 1990 levels by 2012 using everything from zero emission public transit to LED streetlights.
In New York City: Bloomberg called for 30% cuts from current emissions by 2030 (and 2017 for municipal operations) and supplanting the Manhattan skyline’s quaint rooftop water tanks with wind turbines.
In Chicago: earlier this month, Mayor Daley announced a detailed and comprehensive program to reduce Chicago’s emissions 25% below 1990 levels by 2020, noting that at today’s energy prices this is a cost cutting program for Chicagoans. The Mayor observed “We can’t solve the world’s climate change problem in Chicago, but we can do our part.”

In addition, more than 884 cities to date have signed on to the U.S. Conference of Mayors Climate Protection Agreement, under which they aspire to “meet or beat” the Kyoto Protocol emissions targets.

Cities, of course, are critical to any global challenge. More than half the world’s population is now urban, and cities consume 75% of the world’s energy while producing 80% of greenhouse gas emissions.

The question is: why are cities stepping up the plate, while Congress continues to drag its feet? Here are three possible reasons:

First, cities are on the front lines of global warming scenarios that increasingly look all too real. When natural disasters such as floods, hurricanes, and sustained heat waves strike, dense population centers—and their mayors—feel the most pain. Ask Galveston Mayor Lyda Ann Thomas—or New Orleans Mayor Ray Nagin. That’s why New York City’s climate change action plan (PDF) includes both disaster planning and long-term adaptation.

Second, cities see big opportunities. Strong energy and building efficiency codes make cities more competitive, and attractive to companies looking to save costs. Public transit and low-emission vehicles make cities cleaner and less congested. Anti-sprawl planning not only saves energy, it makes metropolitan areas more attractive and protects the property tax base. And new, green city infrastructure means lots of new, green jobs, and new businesses moving in. As any mayor will tell you, jobs (and the tax base that comes with them) are the life-blood of City Hall. Cities compete fiercely for jobs and new enterprise. Getting serious about global warming gives them a first-mover advantage.

Finally, mayors are close to their voters. They hear that people want action on energy and climate. At the city level, political success means getting things done.

Congress: are you listening?

Bill Gates Calls for Capitalism That Serves the Poor

Allen Hammond — Thu, 24 Jan 2008 10:29:42 -0500

In a speech at Davos today, Bill Gates called for a more inclusive capitalism that “would have a twin mission: making profits and also improving lives for those who don’t fully benefit from market forces.” That is a major milestone in the evolving thinking of perhaps the most influential philanthropist of our time.

In 2000, I organized a conference in Seattle on Creating Digital Dividends at which Mr. Gates, in a keynote address, famously said that “poor people don’t need computers” and rejected a business approach to alleviating poverty. Within a year, however, he had changed his mind, and Microsoft became a leader in seeking ways to provide affordable services to low-income populations—in some small measure with WRI’s help.

The beginnings of a more full-fledged belief in inclusive capitalism, according to the WSJ today, came at a dinner in Seattle, organized by WRI, in which Mr. Gates spent several hours talking with BOP guru C.K. Prahalad (in his capacity as a WRI Board member). I was also at that dinner, and remember Mr. Gates saying to me that the question was how far towards the bottom of the pyramid could business approaches go—not too far, was his assessment. But again, his thinking evolved.

Now Mr. Gates is arguing that capitalism, appropriately pursued, is in fact the best hope to bring services and improve productivity and create opportunity for the world’s 4 billion poor—and that, accordingly, the world needs to invest much more heavily in the micro, small, and medium-sized enterprises that are close to the poor. If Mr. Gates puts the muscle of his foundation behind such enterprise development—which we have long argued is the principal bottleneck to a successful BOP business approach—then perhaps the world will really change.

The Rise of China's Energy Efficiency Giant

Ray Cheung — Mon, 14 Jan 2008 12:33:31 -0500

Beijing Shenwu Thermal Energy Company, a once struggling small enterprise, is revolutionizing China’s industrial energy consumption by making it more efficient and cleaner.

Shenwu designs, produces and sells advanced industrial combustion and heating furnaces that employ the technology, known as high temperature air combustion (HTAC), which is based on the principle of recycling combustion air that is reheated at extreme temperatures. Through years of rigorous research, the company has developed patented HTAC systems that can reduce energy consumption by as much as 60 percent and decrease carbon emissions by at least 30 percent compared to traditional systems. The technology is so good that the Chinese government and World Bank have recognized Shenwu systems as one of the country’s best energy saving solutions.

With this ability to generate massive energy savings, Shenwu customers can recover their investment costs in as quickly as six months. The result - hundreds of Chinese energy intensive companies are lining up to buy the combustion and heating furnaces. There are currently over 170 users of its system, which include China’s biggest steel conglomerates, such as Shanghai Baosteel Group and Shagang Group. In fact, its market share of the Chinese steel industry’s energy efficient heating sector stands at an impressive 70 percent. The company is also going global with a growing number of patrons in Japan, South Korea and Europe, such as Sweden’s SSAB, India’s Tata Steel and Taiwan’s China Steel.

This boost in customers of course equates to skyrocketing revenues. The company’s gross sales for 2007 will top over RMB3 billion, or US$400 million, a growth of over 100 percent from 2006. For 2008, the firm expects the figure to double to RMB6 billion (US$800 million). Just as impressive as the financials are the real environmental benefits. Shenwu estimates its technologies have reduced annual industrial energy consumption by the equivalent of 1.1 million tons of coal, thus cutting carbon dioxide emissions by over 5 million tons a year. This is a crucial feat for China which not only has some of the world’s dirtiest skies, but is now estimated to surpass the United States as the number one global emitter of heat-trapping greenhouse gases.

Beijing mayor Wang Qishan (left) and Shenwu chairman and founder Wu Daohong (right)

“We are working very hard to make our technology even more efficient,” said Shenwu founder and chairman Wu Daohong, who holds a doctorate in rocket fuel combustion science and currently oversees over 800 employees in offices and research institutes across the country. At the age of only 41, he is frequently mentioned in the Chinese press as one of China’s most promising entrepreneurs. Wu said Shenwu is aggressively expanding into the building, petroleum, chemical and glass manufacturing heating market. “Any business that requires heating furnaces, we will be there!”

Shenwu’ road to prosperity has not been easy, with its path epitomizing the challenges of thousands of small Chinese companies trying to grow their way to success. When Wu founded the company in 1995 with a handful of staff, he financed the business entirely by himself without any bank lending or venture capital investment. To sell his heating furnaces, he traveled by train to meet with prospective customers, carrying the bulky equipment along with him. During his meetings with company executives, he would provide educational seminars on industrial energy efficiency and the technological advancements in heating systems. One of his first clients was a ceramics factory in the central city of Xi’an.

While Wu was able to turn a profit in his first year - earning over RMB100,000 (US$14,000), he soon ran out of funds when he put the money back into research. Again, with no bank or venture capital willing to provide him with cash, the aspiring entrepreneur relied on the most common source of financing for small Chinese businesses - friends and family. In 1996, he convinced a former professor to invest RMB200,000 (US$28,000) in his company.

Wu’s breakthrough came in 2004 when a Tianjin-based steel company made a RMB80 million (US$11 million) order, eight years after Wu’s first education seminar with the firm’s executives. As revenues started to pick up, Shenwu was finally able to secure some bank loans and government subsidies. However, the company again was unable to receive venture capital from investors who still viewed the company as too risky. One firm that recognized Shenwu’s potential introduced Wu to the World Resources Institute’s New Ventures China program, which mentors promising sustainable Chinese small and medium enterprises in business development. After weeks of training, Shenwu strengthened its business strategy and was selected by a panel of judges as one of the best companies at the New Ventures China investor forum in 2004. “New Ventures has been a big supporter of us,” said a thankful Wu. “The staff has really helped us in our development.”

Thanks to its success, Shenwu nowadays has no problems finding interested backers. In December of 2007, the company announced that after being courted by more than ten private equity firms, it selected the Chinese partner of Goldman Sachs’s private equity arm - Beijing Enterprise Holdings - to be one of its investors. Founder Wu has also met with representatives from the NASDAQ who are eager to have the company complete its initial public offering on the New York-based exchange. These achievements are indeed proof of how one company can make a difference when the founder not only has the drive, but also has the right support to do so.

Top 10 Outcomes 2007

Rich Barnett — Tue, 20 Nov 2007 11:15:06 -0500

Each year, we evaluate the impact of our work in four sustainable development goal areas and announce our top ten outcomes. Each is a glimpse of what’s possible when we work together as a global community.<!–break–>

You can view these and our other top ten outcomes from 2005 and 2006 on our Interactive Outcomes Map.

Worldwide
Aligning Investment with Sustainability
In 2007, the Interfaith Center on Corporate Responsibility, a group of 275 faith-based institutional investors with a combined market portfolio of more than $10 billion, filed a shareholder resolution requiring Newmont Mining Corporation to produce a report addressing community-based opposition to its operations around the world. Activists have criticized Newmont, one of the world’s largest gold miners, for environmental problems in indigenous communities. In an unprecedented move for a U.S. mining company, Newmont’s directors and shareholders approved the resolution. It’s the first step toward Newmont developing new procedures for involving local communities in determining how its development projects might affect their land or way of life. WRI worked with the Interfaith Coalition to help members better understand how the informed consent of a community affected by development projects makes good business sense and leads to more equitable, environmentally-friendly results.

Worldwide
Greening the Capital Markets
Four years ago, few financial firms factored climate change impacts into their operations. Now, due in large part to WRI’s work to examine the risks and opportunities that climate change is creating for business, industry leaders such as ABN AMRO, Bank of America, Citi, Goldman Sachs, HSBC, JPMorgan Chase, and Lehman Brothers are committing significant resources and billions of dollars toward cleaner technologies and climate change solutions. What started as “boutique research” is now a mainstream issue. WRI believes that financial markets attuned to environmental issues will create powerful incentives for companies to improve their environmental performance, while also ensuring better returns for investors.

Mexico
A National GHG Reduction Strategy
Mexico currently ranks twelfth in the world in terms of GHG emissions. Although not bound by Kyoto Protocol greenhouse gas (GHG) emissions limits, the country is committed to fighting global warming. Mexico’s new climate change strategy proposes a graduated process that begins with GHG accounting and reporting, progresses to energy sector GHG caps, and culminates in a national cap-and-trade system linked to international GHG markets. WRI provided the GHG Protocol accounting tools that undergird the policy and provided technical consultation to the Mexican government. WRI also helped launch a Mexican industry-led voluntary GHG accounting program in 2004. WRI is working with partner organizations to replicate the model in Brazil, China, India, and the Philippines.

India
Clean Urban Transport
Transportation is quite literally the engine of economic growth in large congested cities throughout the developing world. EMBARQ – the WRI Center for Sustainable Transport – is working to bring cleaner, more efficient transportation systems to these cities. With assistance from EMBARQ and other national and international organizations, India’s Ministry of Urban Development is implementing the country’s first-ever national urban transportation policies. Cities and states that adopt the policies become eligible for financial assistance from a new $11 billion government program, Jawaharlal Nehru Urban Renewal Mission, to support sustainable transport projects. The policies are a significant step toward reducing greenhouse gas emissions and achieving India’s vision of making its cities the most productive and livable in the world.

United States
Accelerating the U.S. Response to Climate Change
In early 2007, the politics of climate change experienced a tectonic shift when the CEOs of ten major corporations and four national environmental groups – including WRI – joined together in calling on the U.S. government to quickly enact strong national legislation requiring significant reductions in greenhouse gas (GHG) emissions. The U.S. Climate Action Partnership (USCAP) and its bold proposals have advanced the policy debate in Congress. As USCAP membership grows (now at thirty one participating organizations representing over 2 million people in membership and over $2 trillion in market capitalization) so does the number of climate bills introduced. WRI was instrumental in the formation of USCAP, which is the result of a ten-year effort to engage the private sector in the design of business strategies and market-based policies to achieve strong national GHG reduction goals.

Indonesia
Reducing Forest Fire Threats
Indonesia’s Kalimantan Province on the island of Borneo is a resource rich region subject to forest fires that regularly break out during dry spells because of the spread of illegal land-clearing fires. Indonesia is the fourth largest global emitter of greenhouse gas emissions, and forest fires are a significant contributor to these emissions. A new “fire atlas” produced by WRI, its local partners, and the Indonesian Ministry of Forestry is helping the government do a better job of monitoring fires and land clearing, thereby enabling the government to shift money and resources to at-risk protected areas. The next step is a fire atlas for the entire country.

Mexico
Sustainable Entrepreneurship
WRI’s New Ventures project identifies, mentors, and provides small and medium-sized enterprises (SMEs) with access to investment. New Ventures operates in five of the world’s most vibrant emerging economies – Brazil, China, India, Indonesia, and Mexico – where current business and development trends will impact the entire world. In 2007, New Ventures Mexico launched an independent institution – Centro de Negocios Sustentables. With a $400,000 grant from Mexico’s Ministry of Economics, the Center, the first of its kind in Mexico, provides sustainable SMEs with a wide range of services from business acceleration and incubation to market access through the Green Pages. Since its founding, New Ventures has provided comprehensive support to over 150 entrepreneurs and facilitated $38 million in investments for sustainable companies.

Central Africa
Fighting Illegal Logging
Illegal logging in Central Africa results in the loss of millions of dollars in revenue each year, exacerbates poverty in forest-dependent communities, accelerates forest ecosystem degradation and undermines efforts to invest in long-term sustainable forest management. WRI, in collaboration with the International Conservation Union and the Inter-African Forest Industries Association, developed a set of legality standards that assesses if timber products produced and exported in Central Africa are legal. Those legality indicators are now being used by governments of forest-rich countries in Central Africa for establishing their own national standards, notably in view of satisfying European Union regulations which will soon require that all imported timber products come from legal sources. In addition, WRI works with those governments to map and monitor their logging concessions and protected areas.

United States
Red and Blue States Go Green
The first step in addressing the challenge of climate change is to define a consistent way to measure its causes. In April 2007, thirty-four U.S. states formed the Climate Registry to measure, track, verify, and publicly report GHG emissions accurately, transparently, and consistently across borders and industry sectors. The Registry will support voluntary, market-based, and regulatory GHG emissions reporting programs. The states joining represent 78% of the U.S. population, with impressive geographic, economic, and political diversity. WRI played a pivotal role in helping to convene this initiative and by providing technical consulting. Ideally, these standards and strategies will help support and provide a common template for federal climate change policies and programs. Find out more …

Ecuador
Giving Citizens an Environmental Voice
Despite its small size, Ecuador is one of the world’s most biodiverse countries. Political instability, though, has led to weak environmental laws and few opportunities for citizens to participate in decisions about the management of the country’s rich natural resources. A new law now requires the government to consult citizens on environmental matters. It’s the result of a long process undertaken by WRI and Ecolex, a non-profit organization in Ecuador focused on sustainable development. Together we identified weaknesses in Ecuador’s laws regulating public access to environmental information, participation, and justice. This assessment was followed by multi-stakeholder workshops which led to the creation of draft legislation approved by the Ministry of Environment and signed into law by the president.