Joint India-Japan Fund for climate and environment

A $600 million fund for climate and environment projects was launched recently by India’s National Investment and Infrastructure Fund (NIIF) and Japan Bank for International Cooperation (JBIC), according to an Indian Ministry of Finance statement. With India and Japan as anchor investors, this joint initiative signals a key dimension of collaboration between the two countries in an area that is a shared priority.

The statement adds that this announcement marks the NIIF’s first bilateral fund, with the Indian government contributing 49% of the target corpus and the remaining 51% contributed by the JBIC. The Fund will be managed by NIIF Limited (NIIFL) and JBIC IG (a subsidiary of JBIC) and will support NIIFL in promoting Japanese investments in India.

This India-Japan Fund will focus on investing in environmental sustainability and low carbon emission strategies and aims to play the role of being a ‘partner of choice’ to further enhance Japanese investments into India. The setting up of this Fund represents a key milestone in the strategic and economic partnership between the Government of Japan and Government of India, the statement said.

A Livemint report adds that the NIIF is a sovereign wealth fund, which was founded in 2015 to provide an investment platform for international and Indian investors. While the government holds a 49% stake in the fund, 51% is held by domestic institutional investors, sovereign wealth funds, international pension funds and others like the US International Development Finance Corporation (USIDFC), multilateral development banks including Asian Infrastructure Investment Bank (AIIB), Asian Development Bank (ADB) and New Development Bank (NDB).

As for the NIIF, an OnManorama report explains that in the Union Budget 2015-16, the government announced the creation of the Investment and Infrastructure Fund (NIIF). Since infrastructure investments require long-term, patient capital, the government of India anchored the establishment of the NIIF, a fund manager that manages investments in infrastructure and related sectors in India. The NIIF is a collaborative investment platform for international and Indian investors which manages funds with investments in different asset classes and diversified sectors that generate attractive risk-adjusted returns. The NIIF manages over $4.3 billion of equity capital commitments across its three funds – Master Fund, Fund of Funds, and Strategic Opportunities – each with a distinct investment strategy committed to support the country’s growth needs.

The JBIC is a policy-based financial institution of Japan, and conducts lending, investment and guarantee operations while complementing the private sector financial institutions. JBIC’s mission is to contribute to the sound development of Japan and the international economy and society by conducting its operations.

In 2022, the JBIC had signed a Memorandum of Understanding (MOU) with the NIIFL for the establishment and promotion of the India-Japan Clean and Growth Platform, according to a JBIC press release. This MOU aimed to promote environmental preservation, low carbon emission strategies, and growth of the Indian economy, and enhance the cooperative relationship between Indian and Japanese companies across all sectors. The NIIFL and JBIC had then agreed to consider the establishment of a bilateral India-Japan Fund, which will make equity investments in environmental preservation and low carbon emission strategies. In addition to the Fund, the JBIC also planned to consider providing debt financing to investee companies of funds managed by the NIIFL by utilizing the JBIC’s loan functions.

  India is an important partner for Japan in realizing a “Free and Open Indo-Pacific.” The Governments of India and Japan have been undertaking multiple initiatives, including the India-Japan Clean Energy Partnership, to promote environmental preservation efforts in India, and they have also set a target of increasing Japan’s investment in India to JPY5 trillion over the next five years, the press release said.

In the NIIFL statement, commenting on this partnership, Sujoy Bose, Managing Director & Chief Executive Officer, NIIFL, said, “We are delighted to partner with the JBIC for this initiative. The climate sector and the energy transition in India will offer significant opportunities for investment and the India-Japan Fund, which is expected to be operational early next year, will participate in these opportunities and promote collaboration between Indian and Japanese companies. Through this partnership we aim to support the economic and environmental cooperation between India and Japan, which should translate to increased investment by Japanese companies and investors into India.”