KUALA LUMPUR: The need to address climate change and adopt sustainable practices has taken on a greater urgency across the globe, said Malaysia Venture Capital Management Bhd (Mavcap).
Chief executive officer Shahril Anas said Mavcap's role was also to focus on environmental, social and governance (ESG) investments into this sector, which would provide a more meaningful purpose in investments.
"Coupled with the sustainable, circular and sharing economy, the fund aspires to contribute to a better world we live in," he told the New Straits Times.
Shahril said Mavcap's investment in Asia Greentech Fund (AGTF), for example, would provide opportunities for Malaysian entrepreneurs and start-ups with innovative and cutting-edge green technology.
Mavcap is one of the two limited partners of the green energy and green technology fund.
Globally, there is a renewed push towards sustainability with solid growth potential for the green energy segment, he said.
"In Malaysia, there was previously no equity funding or a dedicated venture capital (VC) looking into green technology. However, Malaysia does have the Greentech Financing Scheme, where banks provide loans to companies.
"However, to obtain the loan, one must have equity in the place. Or even if a company has the equity, they may not have the experience or track record, and banks would not grant the loan.
"As such, companies need this type of funds such as the AGTF, which provides the opportunity to nurture our local start-ups and entrepreneurs in the green energy and green technology space," said Shahril.
He said the nature of the VC industry was highly different from private equity investment or banks in terms of risk/return appetite for green technology.
"The VC industry is focused on equity and the development of start-ups, to exit at the best yield possible to the fund. However, equity risk is much higher than loan risk.
"When we invest in a company, we share the risks of that company. This is the nature of all VCs. Mavcap is committed to our mandate to support the growth of entrepreneurs and start-ups in Malaysia and spur the development of Malaysia's VC industry," said Shahril.
Mavcap and AGTF are also cognisant of the fact that investments in both green energy and other green technologies will continue to grow as new ideas, business models, and financing options come to maturity.
AGTF partner Amin Ashari Shafie said the fund and Mavcap shared the same vision and belief in economic development in a green and sustainable manner.
"Both entities target returns would be determined by the sub-sectors of its key industries, with an expected internal rate of return of 15 per cent on the fund.
"In general, the gestation period for VC is about eight years to ensure attractive returns of investment. Apart from investment, we also work closely with our portfolio companies to grow the business and develop and strengthen their customer base through our close networks with governments, agencies and state-owned enterprises in many countries.
"We also endeavour to provide strategic guidance and counsel on corporate governance, management best practices and plans for a suitable exit for investors," he said.
Shahril believes there was immense potential for the fund, given the increased focus on ESG standards coupled with the growing global demand for green energy, which is expected to continue to accelerate.
"Through our partnership with AGTF, Mavcap is committed to supporting innovative start-ups that can help bring about viable solutions to help drive sustainability and address the global issue of climate change."
Supporting local entrepreneurs would help to spur green energy and green technology ecosystems, not only in Malaysia but also in Asia, he added.